Exhibit 10.17


 


LOAN AGREEMENT


 


Dated as of February 18, 2004



by and among



ARC COMMUNITIES 17 LLC


 


 


as Borrower,





and



CITIGROUP GLOBAL MARKETS REALTY CORP.


 

















 


LIST OF SCHEDULES


 


SCHEDULES


 


	
  1

  	
  –

  	
  Immediate Repairs Reserved for in Deferred Maintenance Escrow Account

  
	
  2

  	
  –

  	
  Organizational Chart

  
	
  2.17

  	
  –

  	
  Allocated Loan Amounts

  
	
  3

  	
  –

  	
  Homesites as of the Closing Date

  
	
  4

  	
  –

  	
  Exceptions to Representations and Warranties

  
	
  5

  	
  –

  	
  Addresses for Notices

  
	
  6

  	
  –

  	
  Work Reserve Funding Conditions for Deferred Maintenance Escrow Account

  
	
  7

  	
  –

  	
  Leases with Affiliated Borrowers

  
	
  8

  	
  –

  	
  Form of Quarterly Statement

  
	
  9

  	
  –

  	
  Form of Monthly Statement

  
	
  10

  	
  –

  	
  Form of Standard Lease as of the Closing Date

  



 


i

















 


LOAN AGREEMENT


 


THIS LOAN AGREEMENT, made as of February     ,
2004, is by and among ARC COMMUNITIES 17 LLC, a Delaware limited liability
company, having an address at 600 Grant Street, Suite 900, Denver, Colorado
80203 (“Borrower”), and CITIGROUP GLOBAL MARKETS REALTY CORP., a New
York corporation, having an address at 388 Greenwich Street, 11th Floor, New
York, New York 10013 (together with its successors and assigns, whether one or
more, “Lender”).


 


RECITALS


 


WHEREAS, Borrower desires to obtain from Lender the Loan in an amount
equal to the Loan Amount (each as hereinafter defined) to, with respect to
certain of the Mortgaged Property (as hereinafter defined), finance a portion
of the acquisition cost of, and, with respect to other of the Mortgaged
Property, refinance existing debt at such Mortgaged Property and to pay certain
other fees and expenses;


 


WHEREAS, Lender is unwilling to make the Loan unless Borrower executes
and delivers this Agreement, the Note and the Loan Documents (each as
hereinafter defined) to which it is a party which shall establish the terms and
conditions of, and provide security for, the Loan; and


 


WHEREAS, Borrower has agreed to establish certain accounts and to grant
to Lender, a security interest therein upon the terms and conditions of the
security agreement set forth in Section 2.15.


 


NOW, THEREFORE, in consideration of the making of the Loan by Lender
and for other good and valuable consideration, the mutual receipt and legal
sufficiency of which are hereby acknowledged, the parties hereby covenant,
agree, represent and warrant as follows:


 


ARTICLE I.

CERTAIN DEFINITIONS


 


Section 1.1.            Definitions.  For all purposes of this Agreement:  (1) the capitalized terms defined in this Article
1 have the meanings assigned to them in this Article 1 and include
the plural as well as the singular; (2) all accounting terms have the meanings
assigned to them in accordance with GAAP (as hereinafter defined); (3) the
words “herein”, “hereof”, and “hereunder” and other words of similar import
refer to this Agreement as a whole and not to any particular Article, Section,
or other subdivision; and (4) the following terms have the following meanings:


 


“Account Collateral” has the meaning set forth in Section
2.15(a) hereof.


 


“Accounts” means all accounts (as defined in the relevant UCC),
now owned or hereafter acquired by Borrower, and arising out of or in
connection with, the operation of the Mortgaged Property and all other accounts
described in the Management Agreement and all


 

















 


present and future accounts
receivable, inventory accounts, chattel paper, notes, insurance policies,
Instruments, Documents or other rights to payment and all forms of obligations
owing at any time to Borrower thereunder, whether now existing or hereafter
created or otherwise acquired by or on behalf of Borrower, and all Proceeds
thereof and all liens, security interests, guaranties, remedies, privileges and
other rights pertaining thereto, and all rights and remedies of any kind
forming the subject matter of any of the foregoing.


 


“Affiliate” of any specified Person means any other Person (i)
controlling or controlled by or under common control with such specified
Person; (ii) directly or indirectly owning or holding ten percent (10%) or more
of any equity interest in the first Person; or (iii) ten percent (10%) or more
of whose equity interests are directly or indirectly owned or held by the first
Person.  For the purposes of this
definition, “control” when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities or other
beneficial interests, by contract or otherwise; and the terms “controlling” and
“controlled” have the meanings correlative to the foregoing.


 


“Agreement” means this Loan Agreement, together with the
Schedules and Exhibits hereto, as the same may from time to time hereafter be
modified, supplemented or amended.


 


“Appraisal” means each appraisal with respect to an individual
Mortgaged Property prepared by an Appraiser in accordance with the Uniform
Standards of Professional Appraisal Practice of the Appraisal Foundation, in
compliance with the requirements of Title 11 of the Financial Institution
Reform, Recovery and Enforcement Act and utilizing customary valuation methods
such as the income, sales/market or cost approaches.


 


“Appraiser” means a nationally recognized MAI appraiser selected
by Borrower and reasonably approved by Lender.


 


“Approved Capital Expenditures” has the meaning set forth in Section
2.13(a)(iii) hereof.


 


“Assignment of Rents and Leases” means, with respect to the
Mortgaged Property, an Assignment of Rents and Leases (and, if there are more
than one, each and every one of them), dated as of the Closing Date, granted by
the Borrower to Lender with respect to the Leases, as same may thereafter from
time to time be supplemented, amended, modified or extended.


 


“Assumed Loan Debt Service” means the greater of (i) the product
of the Monthly Debt Service Payment Amount multiplied by twelve (12) and (ii)
the product of the Principal Indebtedness multiplied by a market constant of
0.075.


 


“Basic Carrying Costs” means the following costs with respect to
the Mortgaged Property:  (i) Impositions
and (ii) insurance premiums for policies of insurance required to be maintained
by Borrower pursuant to this Agreement or the other Loan Documents.


 


“Borrower” has the meaning provided in the first paragraph of
this Agreement.


 


2

















 


“Business Day” means any day other than a Saturday, a Sunday or
a day on which commercial banks in the State of New York are authorized or
obligated by law, governmental decree or executive order to be closed.


 


“Capital Improvement Costs” means costs incurred or to be
incurred in connection with replacements and capital repairs made to the
Mortgaged Property which would be capitalized in accordance with GAAP.


 


“CERCLA” has the meaning set forth in Section 5.1(d)(i)
hereof.


 


“Chattel Paper” means all of Borrower’s right, title and
interest, whether now owned or hereafter acquired, in, to and under all
“chattel paper” as defined in the UCC (whether tangible chattel paper or
electronic chattel paper).


 


“Closing Date” means the date of the funding of the Loan.


 


“Code” means the Internal Revenue Code of 1986, as amended, and
as it may be further amended from time to time, any successor statutes thereto,
and applicable U.S. Department of Treasury regulations issued pursuant thereto
in temporary or final form.


 


“Collateral” means, collectively, the Land, Improvements,
Leases, Rents, Personalty, and all Proceeds, and (to the full extent
assignable) Permits, which is or hereafter may become subject to a Lien in
favor Lender as security for the Loan (whether pursuant to the Mortgages, any
other Loan Document or otherwise), all whether now owned or hereafter acquired
and all other property which is or hereafter may become subject to a Lien in
favor Lender as security for the Loan and including all property of any kind
described as part of the Mortgaged Property under any of the Mortgages.


 


“Collateral Security Instrument” means any right, document or
instrument, other than the Mortgages, given as security for the Loan,
including, without limitation and the Contract Assignment.


 


“Collection Account” has the meaning set forth in Section
2.12(a) hereof.


 


“Collection Account Agreement” means the Collection Account
Agreement, dated as of the applicable date and executed by Borrower, Lender and
the Collection Account Bank, relating to the Collection Account and the Reserve
Accounts and any other accounts maintained with the Collection Account Bank.


 


“Collection Account Bank” means BancOne, N.A., or any successor
financial institution appointed by Lender.


 


“Condemnation Proceeds” means, in the event of a Taking with
respect to the Mortgaged Property, the proceeds in respect of such Taking less
any reasonable third party out-of-pocket expenses incurred in prosecuting the
claim for and otherwise collecting such proceeds.


 


“Contest” has the meaning set forth in Section 9.24(D)(1)
hereof.


 


3

















 


“Contingent Obligation” means, as used in the definition of
Other Borrowings, without duplication, any obligation of Borrower guaranteeing
any indebtedness, leases, dividends or other obligations (“primary
obligations”) of any other Person (the “primary obligor”) in any
manner, whether directly or indirectly. 
Without limiting the generality of the foregoing, the term “Contingent
Obligation” shall include any obligation of Borrower:


 


(i)            to
purchase any such primary obligation or any property constituting direct or
indirect security therefor;


 


(ii)           to
advance or supply funds (x) for the purchase or payment of any such primary
obligation or (y) to maintain working capital or equity capital of the primary
obligor;


 


(iii)          to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation; or


 


(iv)          otherwise
to assure or hold harmless the holder of such primary obligation against loss
in respect thereof.


 


The amount of any Contingent Obligation shall be deemed to be an amount
equal to the stated or determinable amount of the primary obligation in respect
of which such Contingent Obligation is made or, if not stated or determinable,
the maximum reasonably anticipated liability in respect thereof (assuming
Borrower is required to perform thereunder) as determined by Lender in good
faith.


 


“Contract Assignment” means, with respect to the Mortgaged
Property, the Assignment of Contracts, Licenses, Permits, Agreements,
Warranties and Approvals, dated as of the Closing Date and executed by the
Borrower.


 


“Contracts” means the Management Agreement and all other
agreements to which Borrower is a party or which are assigned to Borrower by
the Manager in the Management Agreement and which are executed in connection
with the construction, operation and management of the Mortgaged Property
(including, without limitation, agreements for the sale, lease or exchange of
goods or other property and/or the performance of services by it, in each case
whether now in existence or hereafter arising or acquired) as any such
agreements have been or may be from time to time amended, supplemented or
otherwise modified.


 


“Debt Service Coverage Ratio” means, as of any date of
calculation with respect to the Mortgaged Property, the quotient expressed to
two decimal places of the Underwritten Net Cash Flow divided by the Assumed
Loan Debt Service.


 


“Debt Service Coverage Test” means, as of the Closing Date, a
test which shall be satisfied if the Underwritten Net Cash Flow is at least
equal to the product of 1.25 and the Assumed Loan Debt Service.


 


“Debt Service Reserve Account” has the meaning set forth in Section
2.13(c).


 


4

















 


“Deed of Trust Trustee” means the trustee under any Mortgage
that constitutes a “deed of trust” under applicable law.


 


“Default” means the occurrence of any event which, but for the giving
of notice or the passage of time, or both, would be an Event of Default.


 


“Default Rate” means the per annum interest rate equal to the
lesser of (a) 5.0% per annum in excess of the rate otherwise applicable
hereunder and (b) the maximum rate allowable by applicable law.


 


“Defeasance” means any of a Total Defeasance or a Partial
Defeasance.


 


“Defeasance Collateral” shall mean Partial Defeasance Collateral
or Total Defeasance Collateral, as applicable.


 


“Defeasance Collateral Account” has the meaning set forth in Section
2.7.


 


“Defeasance Date” has the meaning set forth in Section 2.7.


 


“Defeased
Note” has the meaning set forth in Section 2.7.


 


“Deferred Maintenance Escrow Account” has the meaning set forth
in Section 2.13(a).


 


“Deposit Account” means all of Borrower’s right, title and
interest, whether now owned or hereafter acquired, in, to and under all
“deposit accounts” as defined in the UCC.


 


“Disclosure Certificate” has the meaning set forth in Section
5.1(w) hereof.


 


“Disclosure Documents” has the meaning set forth in Section
5.1(w) hereof.


 


“Documents” means all of Borrower’s right, title and interest,
whether now owned or hereafter acquired, in, to and under all “documents” as
defined in the UCC (whether negotiable or non-negotiable) or other receipts
covering, evidencing or representing goods.


 


“EO13224” has the meaning set forth in Section 4.1(v)
hereof.


 


“Eligible Account” means a separate and identifiable account
from all other funds held by the holding institution, which account is either (i)
an account maintained with a federal or state chartered depository institution
or trust company that (A) satisfies the Rating Criteria and (B) insures the
deposits made to such account through the Federal Deposit Insurance
Corporation, or (ii) a segregated trust account maintained with the corporate
trust department of a federal or state chartered depository institution or
trust company subject to regulations regarding fiduciary funds on deposit
similar to Title 12 of the Code of Federal Regulations Section 9.10(b) which,
in either case, has corporate trust powers, acting in its fiduciary capacity
and in either case having combined capital and surplus of at least $100,000,000
or otherwise acceptable to the Rating Agencies.  An Eligible Account shall not be evidenced by a certificate of
deposit, passbook, other instrument or any other physical indicia of
ownership.  Following a


 


5

















 


downgrade below the Rating
Criteria, withdrawal, qualification or suspension of such institution’s rating,
each account must at Lender’s request promptly (and in any case within not more
than thirty (30) calendar days) be moved to a qualifying institution or to one
or more segregated trust accounts in the trust department of such institution,
if permitted.


 


“Engineer” means an Independent Engineer selected by Borrower
and reasonably approved by Lender.


 


“Environmental Auditor” means an Independent environmental
auditor selected by Borrower and reasonably approved by Lender.


 


“Environmental Claim” means any notice, notification, request
for information, claim, administrative, regulatory or judicial action, suit,
judgment, demand or other written communication (whether written or oral) by
any Person or Governmental Authority alleging or asserting liability with
respect to Borrower or any Mortgaged Property (whether for damages,
contribution, indemnification, cost recovery, compensation, injunctive relief,
investigatory, response, remedial or cleanup costs, damages to natural
resources, personal injuries, fines or penalties) arising out of, based on or
resulting from (i) the presence, Use or Release into the environment of any
Hazardous Substance at any location (whether or not owned, managed or operated
by Borrower) that affects Borrower or any Mortgaged Property, (ii) any fact,
circumstance, condition or occurrence forming the basis of any violation, or
alleged violation, of any Environmental Law or (iii) any alleged injury or
threat of injury to human health, safety or the environment.


 


“Environmental Indemnity Agreement” means the Environmental
Indemnity Agreement dated as of the Closing Date, from Borrower and the
Guarantor, collectively, as indemnitor, to Lender, as indemnitee, as the same
may be amended, modified or supplemented from time to time.


 


“Environmental Laws” means any and all present and future
federal, state or local laws, statutes, ordinances, rules or regulations, or
any judicial interpretation thereof, any judicial or administrative orders,
decrees or judgments thereunder issued by a Governmental Authority, and any
permits, approvals, licenses, registrations, filings and authorizations, in
each case as now or hereafter in effect, relating to the environment, human
health or safety, or the Release or threatened Release of Hazardous Substances
or otherwise relating to the Use of Hazardous Substances.


 


“Environmental Reports” means each and every “Phase I
Environmental Site Assessment” (and, if applicable, “Phase II Environment Site
Assessment”) as referred to in the ASTM Standards on Environmental Site
Assessments for Commercial Real Estate, E 1527-2000 and an asbestos survey,
with respect to each Mortgaged Property, prepared by one or more Environmental
Auditors and delivered to Lender and any amendments or supplements thereto
delivered to Lender.


 


“Equipment” means all of Borrower’s right, title and interest,
whether now owned or hereafter acquired, in, to and under (i) all “equipment”
as defined in the UCC, and (ii) all of the following (regardless of how
classified under the UCC):  all building
materials, construction


 


6

















 


materials, personal property
constituting furniture, fittings, appliances, apparatus, leasehold
improvements, machinery, devices, interior improvements, appurtenances,
equipment, plant, furnishings, fixtures, computers, electronic data processing
equipment, telecommunications equipment and other fixed assets now owned or
hereafter acquired by Borrower, and all Proceeds of (i) and (ii) as well as all
additions to, substitutions for, replacements of or accessions to any of the
items recited as aforesaid and all attachments, components, parts (including
spare parts) and accessories, whether installed thereon or affixed thereto, all
regardless of whether the same are located on any Mortgaged Property or are
located elsewhere (including, without limitation, in warehouses or other
storage facilities or in the possession of or on the premises of a bailee,
vendor or manufacturer) for purposes of manufacture, storage, fabrication or
transportation and all extensions and replacements to, and proceeds of, any of
the foregoing.


 


“ERISA” means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated
thereunder.  Section references to ERISA
are to ERISA, as in effect at the date of this Agreement and, as of the
relevant date, any subsequent provisions of ERISA, amendatory thereof,
supplemental thereto or substituted therefor.


 


“ERISA Affiliate” means any corporation or trade or business
that is a member of any group of organizations (i) described in Section 414(b)
or (c) of the Code of which Borrower is a member and (ii) solely for purposes
of potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11)
of the Code and the lien created under Section 302(f) of ERISA and Section
412(n) of the Code, described in Section 414(m) or (o) of the Code of which
Borrower is a member.


 


“Event of Default” has the meaning set forth in Section 7.1
hereof.


 


“First Open Defeasance Date” shall mean the earlier of (i) the
Payment Date in March, 2008, or (ii) the date that is two (2) years from the
“start up day” (within the meaning of Section 860G(a)(9) of the IRC) of the
REMIC Trust established in connection with the final Securitization involving
the Loan.


 


“First Open Prepayment Date” is the Payment Date which is in the
second month preceding the month in which the Scheduled Maturity Date
occurs.  For example, if the Scheduled
Maturity Date is February 1, 2013, the First Open Prepayment Date is the
Payment Date in the month of December, 2012.


 


“First Payment Date” has the meaning set forth in Section 2.5
hereof.


 


“Fiscal Year” means the 12-month period ending on December 31st
of each year (or, in the case of the first fiscal year, such shorter period
from the Closing Date through such date) or such other fiscal year of Borrower
as Borrower may select from time to time with the prior consent of Lender.


 


“Fitch” means Fitch, Inc. and its successors.


 


“Foreign Lender” has the meaning set forth in Section 2.10(b)
hereof.


 


7

















 


“Fund” has the meaning set forth in the definition of “Permitted
Investments”.


 


“Funding Losses” has the meaning set forth in Section 2.5(e)
hereof.


 


“GAAP” means generally accepted accounting principles in the
United States of America as of the date of the applicable financial report,
consistently applied.


 


“General Intangibles” means all of Borrower’s right, title and
interest, whether now owned or hereafter acquired, in, to and under (i) all
“general intangibles” as defined in the relevant UCC, now owned or hereafter
acquired by Borrower and (ii) all of the following (regardless of how
characterized):  all agreements, covenants,
restrictions or encumbrances affecting the Mortgaged Property or any part
thereof.


 


“Governmental Authority” means any nation or government, any
state, county, municipality or other political subdivision thereof or any
governmental body, agency, authority, department or commission (including,
without limitation, any taxing authority) or any instrumentality or officer of
any of the foregoing (including, without limitation, any court or tribunal)
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government and any corporation, partnership or
other entity directly or indirectly owned or controlled by the foregoing.


 


“Gross Revenue” means, for any period, the total dollar amount
of all income and receipts received by, or for the account of, Borrower in the
ordinary course of business with respect to the Mortgaged Property, but
excluding Loss Proceeds (other than the proceeds of business interruption
insurance or the proceeds of a temporary Taking in lieu of Rents which shall be
included in Gross Revenue).


 


“Guarantor” means Affordable Residential Communities Inc., a
Maryland corporation, and Affordable Residential Communities LP, a Delaware
limited partnership, on a joint and several basis.


 


“Guaranty of Nonrecourse Obligations” means, with respect to the
Loan, the Guaranty of Nonrecourse Obligations guaranteeing the exceptions to
the nonrecourse provisions of the Loan Documents for which liability is
retained as described in Section 9.24 hereof from the Guarantor to
Lender.


 


“Hazardous Substance” means, collectively, (i) any petroleum or
petroleum products or waste oils, explosives, radioactive materials, asbestos,
urea formaldehyde foam insulation, polychlorinated biphenyls (“PCBs”),
lead in drinking water, lead-based paint and radon, (ii) any chemicals or other
materials or substances which are now or hereafter become defined as or
included in the definitions of “hazardous substances”, “hazardous wastes”,
“hazardous materials”, “extremely hazardous wastes”, “restricted hazardous
wastes”, “toxic substances”, “toxic pollutants”, “contaminants”, “pollutants”
or words of similar import under any Environmental Law, and (iii) any other
chemical or any other hazardous material or substance, exposure to which is now
or hereafter prohibited, limited or regulated under any Environmental Law.


 


8

















 


“Homesites” means, with respect to each Mortgaged Property, the
manufactured housing sites located thereon which are capable of being leased to
a Person to accommodate a manufactured or mobile home, the number of each of
which is set forth on Schedule 3 attached hereto, as such number may be
updated from time to time with the mutual written agreement of Lender and
Borrower.  Such schedule shall include a
breakdown of manufactured housing sites that are capable of accommodating
single and double wide manufactured homes, to the extent such information is
reasonably available to the Borrower.


 


“Immediate Repairs” has the meaning set forth in Section
2.13(a)(ii) hereof.


 


“Impositions” means all taxes (including, without limitation,
all real estate, ad valorem, sales (including those imposed on lease rentals),
use, single business, gross receipts, value added, intangible transaction
privilege, privilege or license or similar taxes), assessments (including,
without limitation, all assessments for public improvements or benefits,
whether or not commenced or completed within the term of the Loan), ground
rents, water, sewer or other rents and charges, excises, levies, governmental
fees (including, without limitation, license, permit, inspection, authorization
and similar fees), and all other governmental charges, in each case whether
general or special, ordinary or extraordinary, foreseen or unforeseen, in
respect of each Mortgaged Property (including all interest and penalties
thereon), accruing during or in respect of the term hereof and which may be
assessed against or imposed on or in respect of or be a Lien upon (1) Borrower
(including, without limitation, all income, franchise, single business or other
taxes imposed on Borrower for the privilege of doing business in the
jurisdiction in which each Mortgaged Property, or any other collateral
delivered or pledged to Lender in connection with the Loan, is located) or
Lender, or (2) any Mortgaged Property, or any other collateral delivered or
pledged to Lender in connection with the Loan, or any part thereof or any Rents
therefrom or any estate, right, title or interest therein, or (3) any
occupancy, operation, use or possession of, or sales from, or activity
conducted on, or in connection with any Mortgaged Property or the leasing or
use of any Mortgaged Property or any part thereof, or the acquisition or
financing of the acquisition of any Mortgaged Property by Borrower.


 


“Improvements” means all buildings, structures, fixtures and
improvements now or hereafter owned by Borrower of every nature whatsoever
situated on any Land constituting part of the Mortgaged Property (including,
without limitation, all gas and electric fixtures, radiators, heaters, engines
and machinery, boilers, ranges, elevators and motors, plumbing and heating
fixtures, carpeting and other floor coverings, water heaters, awnings and storm
sashes, and cleaning apparatus which are or shall be affixed to the Land or
said buildings, structures or improvements and including any additions,
enlargements, extensions, modifications, repairs or replacements thereto).


 


“Indebtedness” means the Principal Indebtedness, together with
all other obligations and liabilities due or to become due to Lender pursuant
hereto, under the Note or in accordance with any of the other Loan Documents,
and all other amounts, sums and expenses paid by or payable to Lender hereunder
or pursuant to the Note or any of the other Loan Documents.


 


“Indemnified Parties” has the meaning set forth in Section
5.1(i).


 


9

















 


“Independent” means, when used with respect to any Person, a
Person that (i) does not have any direct financial interest or any material
indirect financial interest in Borrower or in any Affiliate of Borrower, (ii)
is not connected with Borrower or any Affiliate of Borrower as an officer,
employee, trustee, partner, director or person performing similar functions,
and (iii) is not a member of the immediate family of any Person described in
clauses (i) or (ii).


 


“Independent Manager” has the meaning set forth in Section
8.1(ee).


 


“Instruments” means all of Borrower’s right, title and interest,
whether now owned or hereafter acquired, in, to and under all “instruments” as
defined in the UCC.


 


“Insurance Escrow Account” has the meaning set forth in Section
2.13(b).


 


“Insurance Premiums” has the meaning set forth in Section
5.1(x)(iii).


 


“Insurance Proceeds” means, in the event of a casualty with
respect to the Mortgaged Property, the proceeds received under any insurance
policy applicable thereto.


 


“Insurance Requirements” means all material terms of any
insurance policy required pursuant to this Agreement or any of the Mortgages
and all material regulations, rules and other requirements of the National
Board of Fire Underwriters or such other body exercising similar functions
applicable to or affecting the Mortgaged Property or any part thereof or any
use or condition thereof.


 


“Insured Casualty” has the meaning set forth in Section
5.1(x)(iv)(B).


 


“Intellectual Property” means all of Borrower’s right, title and
interest, whether now owned or hereafter acquired, in, to and under the
trademark licenses, trademarks, rights in intellectual property, trade names,
service marks and copyrights, copyright licenses, patents, patent licenses or
the license to use intellectual property such as computer software owned or
licensed by Borrower or other proprietary business information relating to
Borrower’s policies, procedures, manuals and trade secrets.


 


“Interested Parties” has the meaning set forth in Section
5.1(w) hereof.


 


“Inventory” means all of Borrower’s right, title and interest,
whether now owned or hereafter acquired, in, to and under all “inventory” as
defined in the UCC and shall include all Documents representing the same.


 


“Investment Property” means all of Borrower’s right, title and
interest, whether now owned or hereafter acquired, in, to and under all
“investment property” as defined in the UCC.


 


“IRS” has the meaning provided in Section 2.10(b) hereof.


 


“Land” means the parcels of real estate described on Exhibit
A attached to the Mortgages and made a part hereof.


 


10

















 


“Leases” means all leases, subleases, lettings, occupancy
agreements, tenancies and licenses by Borrower as landlord of the Mortgaged
Property or any part thereof now or hereafter entered into, and all amendments,
extensions, renewals and guarantees thereof, and all security therefor.


 


“Leasing Commissions” means leasing commissions incurred by
Borrower in connection with leasing any Mortgaged Property or any portion
thereof (including renewals of existing Leases).


 


“Legal Requirements” means all governmental statutes, laws, rules,
orders, regulations, ordinances, judgments, decrees and injunctions of
Governmental Authorities (including, without limitation, any of the foregoing
relating to zoning, parking or land use, any and all Environmental Laws and the
Americans with Disabilities Act) affecting Borrower or any Mortgaged Property
or any part thereof or the construction, use, alteration or operation thereof,
or any part thereof (whether now or hereafter enacted and in force), and all
permits, licenses and authorizations and regulations relating thereto, and all
covenants, agreements, restrictions and encumbrances contained in any
instruments, at any time in force affecting the Mortgaged Property or any part
thereof or any utility services or septic systems or other infrastructure serving
any portion of the Mortgaged Property (including, without limitation, any which
may (i) require repairs, modifications or alterations in or to the Mortgaged
Property or any part thereof or any utility services or septic systems or other
infrastructure serving any portion of the Mortgaged Property, or (ii) in any
way limit the use and enjoyment thereof).


 


“Lender” has the meaning provided in the first paragraph of this
Agreement.


 


“Letter of Credit Rights” means all of Borrower’s right, title
and interest, whether now owned or hereafter acquired, in, to and under all
“letter of credit rights” as defined in the UCC.


 


“Lien” means any mortgage, deed of trust, lien (statutory or
other), pledge, hypothecation, assignment, security interest, or any other encumbrance
or charge on or affecting Borrower or any Mortgaged Property or any portion
thereof, or any interest therein (including, without limitation, any
conditional sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and mechanic’s,
materialmen’s and other similar liens and encumbrances).


 


“Loan” means the loan made by Lender to Borrower pursuant to the
terms of this Agreement.


 


“Loan Amount” means an amount equal to $24,951,000.00.


 


“Loan Documents” means this Agreement, the Note, the Contract
Assignment, the Management Agreement, the Manager’s Subordination, the
Mortgages, the Assignments of Rents and Leases, the Environmental Indemnity
Agreement, the Guaranty of Non-Recourse Obligations, the Side Agreement and all
other agreements, instruments, certificates and documents delivered by or on
behalf of Borrower or an Affiliate of Borrower to evidence or secure the Loan
as same may be amended or modified from time to time.


 


11

















 


“Local Collection Account” and “Local Collection Account Bank”
have the meanings set forth in Section 2.12(a).


 


“Local Collection Account Agreement” means with respect to the
Local Collection Account, the lockbox agreement, dated as of the applicable
date and executed by Borrower, Lender and the Local Collection Account Bank.


 


“Loss Proceeds” means Condemnation Proceeds and/or Insurance
Proceeds.


 


“Loss Proceeds Account” has the meaning set forth in Section
2.12(f) hereof.


 


“Losses” has the meaning set forth in Section 5.1(j).


 


“Management Agreement” means with respect to any Mortgaged
Property, the property management agreement entered into between Borrower and
the Manager, in such form as may be reasonably approved by Lender, as such
agreement(s) may be amended, modified or supplemented in accordance with the
terms and conditions hereof from time to time, and any management agreement
which may hereafter be entered into with respect to any Mortgaged Property in
accordance with the terms and conditions hereof, as the same may be amended,
modified or supplemented in accordance with the terms and conditions hereof
from time to time.


 


“Manager” means ARC Management Services, Inc., a Delaware
corporation, the current manager of the Mortgaged Property under the current
Management Agreement, or such other Person as may hereafter be charged with
management of any Mortgaged Property pursuant to a Management Agreement entered
into in accordance with the terms and conditions hereof.


 


“Manager’s Subordination” means, with respect to each Mortgaged
Property, initially each Manager’s Consent and Subordination of Management
Agreement, each executed by the Manager, Borrower and Lender, dated as of the
Closing Date, and in the event a successor or assignee Manager is engaged at
any Mortgaged Property, a subordination agreement executed by Manager, Borrower
and Lender in form and substance satisfactory to Lender, whereby, among other
things, the Management Agreement is subordinated to the Indebtedness and to the
Lien of the Mortgages so long as the Loan remains outstanding.


 


“Master Homesite Lease Agreement” means, with respect to each
legal entity comprising the Borrower, the related Master Homesite Lease
Agreement, dated as of February     , 2004, by and between
ARC Housing, LLC (or with respect to any Mortgaged Property located in Texas,
ARC Housing TX LP, a Delaware limited partnership) and such entity comprising
the Borrower.


 


“Master Homesite Lease Documentation” means, individually or
collectively, as applicable, each and every Master Homesite Lease Agreement.


 


“Master Lease Deposits” means the security deposits under the
Master Homesite Lease Documentation.


 


“Master Lease Deposit Account” has the meaning set forth in Section
2.12(a)(i).


 


12

















 


“Material Adverse Effect” means a material adverse effect upon
(i) the business operations, properties, assets or condition (financial or
otherwise) of Borrower, (ii) the ability of Borrower to perform, or of Lender
to enforce, any of the Loan Documents or (iii) the aggregate value of the
Mortgaged Property.


 


“Maturity Date” means the earlier of (a) the Scheduled Maturity
Date or (b) such earlier date on which the entire Loan is required to be paid
in full, by acceleration or otherwise under this Agreement or any of the other
Loan Documents.


 


“Maximum Rate” has the meaning set forth in Section 2.5(i)
hereof.


 


“Member” means ARC Real Estate Holdings, LLC, a Delaware limited
liability company.


 


“Moody’s” means Moody’s Investors Services, Inc. and its
successors.


 


“Money” means all of Borrower’s right, title and interest,
whether now owned or hereafter acquired, in, to and under (i) all “money” as
defined in the UCC and (ii) all moneys, cash, or other items of legal tender
generated from the use or operation of the Mortgaged Property.


 


“Monthly Debt Service Payment” has the meaning set forth in Section
2.5 hereof.


 


“Monthly Debt Service Payment Amount” has the meaning set forth
in Section 2.5 hereof.


 


“Mortgage” means, with respect to the Mortgaged Property, a
first priority Mortgage or Deed of Trust (as applicable), Assignment of Leases
and Rents, Security Agreement and Fixture Filing, dated as of the Closing Date
(and, if there are more than one, each and every one of them), granted by the
Borrower to or for the benefit of Lender or Deed of Trust Trustee for the
benefit of Lender, respectively, with respect to the Mortgaged Property as
security for the Loan, as same may thereafter from time to time be
supplemented, amended, modified or extended by one or more agreements
supplemental thereto.


 


“Mortgaged Property” means, at any time, individually or
collectively, as applicable, the Land, the Improvements, the Personalty, the
Leases and the Rents, and all rights, titles, interests and estates appurtenant
thereto, encumbered by, and more particularly described in, each of the
Mortgages.


 


“Multiemployer Plan” means a multiemployer plan defined as such
in Section 3(37) of ERISA and which is covered by Title IV of ERISA (i) to
which contributions have been, or were required to have been made by Borrower
or any ERISA Affiliate within the past six years or (ii) with respect to which
Borrower could reasonably be expected to incur liability.


 


“Net Proceeds” means either (x) the purchase price (at
foreclosure or otherwise) actually received by Lender from a third party
purchaser with respect to any Mortgaged Property, as a result of the exercise
by Lender of its rights, powers, privileges and other remedies after the
occurrence of an Event of Default or (y) in the event that Lender (or its
nominee) is the


 


13

















 


purchaser at foreclosure of any
Mortgaged Property, the higher of (i) the amount of Lender’s credit bid or (ii)
such amount as shall be determined in accordance with applicable law, and in
either case minus all reasonable third party, out of pocket costs and expenses
(including, without limitation, all attorneys’ fees and disbursements and any
brokerage fees, if applicable) incurred by Lender (and its nominee, if
applicable) in connection with the exercise of such remedies; provided, however,
that such costs and expenses shall not be deducted to the extent such amounts
previously have been added to the Indebtedness in accordance with the terms of
the Loan Documents or applicable law.


 


“Note” means one or more promissory notes made by Borrower to
Lender pursuant to this Agreement, as such note may be modified, amended,
supplemented, restated or extended, and any replacement notes therefor.


 


“O&M Program” has the meaning set forth in Section
5.1(d)(iv) hereof.


 


“OFAC” has the meaning set forth in Section 4.1(v)
hereof.


 


“Officer’s Certificate” means a certificate delivered to Lender
by Borrower which is signed by an authorized officer of Borrower.


 


“Operating Budget” means, with respect to any Fiscal Year, the
operating budget for the Mortgaged Property reflecting Borrower’s projections
of Gross Revenues and Property Expenses for the Mortgaged Property for such
Fiscal Year and on an annual and monthly basis and submitted by Borrower to
Lender in accordance with the provisions of Section 5.1(r)(viii), which
Operating Budget shall include, as a component thereof, a Working Capital
Budget.


 


“Operating Expense Account” has the meaning provided in Section
2.13(c).


 


“Operating Expenses” means, for any period of calculation, all
expenditures incurred and required to be expensed under GAAP during such period
in connection with the ownership, operation, maintenance, repair and/or leasing
of the Mortgaged Property, including without limitation (or duplication)
Property Expenses.  Notwithstanding the
foregoing, Operating Expenses shall not include (a) Capital Improvement Costs,
(b) any extraordinary items (unless Lender and Borrower approve of the
inclusion of such items as Operating Expenses), (c) depreciation, amortization
and other non-cash charges or (d) any payments of principal or interest on the
Indebtedness or otherwise payable to the holder of the Indebtedness.  Operating Expenses shall be calculated on
the accrual basis of accounting.


 


“Operating Revenues” means, for any period, all regular ongoing
income during such period from the operation of the Mortgaged Property that, in
accordance with GAAP, is included in annual financial statements as
revenue.  Notwithstanding the foregoing,
Operating Revenues shall not include (a) any Loss Proceeds (other than business
interruption proceeds or Condemnation Proceeds in connection with a temporary
Taking and, in either case, only to the extent allocable to such period or
other applicable reporting period), (b) any proceeds resulting from the sale,
exchange, transfer, financing or refinancing of the Mortgaged Property, (c) any
Rent attributable to a Lease more than one month prior to the date on which the
actual payment of Rent is required to be made thereunder, (d) any interest
income from any source, or (e) any


 


14

















 


other extraordinary items as
reasonably determined by Lender. 
Operating Revenues shall be calculated on the accrual basis of
accounting.


 


“Organizational Agreements” means, individually or collectively,
(i) the certificate of formation and operating agreement, (ii) the certificate
of limited partnership and partnership agreement, (iii) the certificate of
incorporation and by-laws or (iv) the trust agreement or other organizational
documents, as applicable of any Person, each as amended or restated from time
to time.


 


“Origination Fee” means 0.5% of the Loan Amount, payable to
Lender on the Closing Date.


 


“Other Borrowings” means, with respect to Borrower, without
duplication (but not including the Indebtedness or any interest rate protection
agreement entered into pursuant hereto) (i) all indebtedness of Borrower for
borrowed money or for the deferred purchase price of property or services, (ii)
all indebtedness of Borrower evidenced by a note, bond, debenture or similar
instrument, (iii) the face amount of all letters of credit issued for the
account of Borrower and, without duplication, all unreimbursed amounts drawn
thereunder, and obligations evidenced by bankers’ acceptances, (iv) all
indebtedness of Borrower secured by a Lien on any property owned by Borrower
(whether or not such indebtedness has been assumed), (v) all Contingent
Obligations of Borrower, (vi) liabilities and obligations for the payment of
money relating to a capitalized lease obligation or sale/leaseback obligation,
(vii) liabilities and obligations representing the balance deferred and unpaid
of the purchase price of any property or services, except those incurred in the
ordinary course of Borrower’s business that would constitute ordinarily a trade
payable to trade creditors, and (viii) all payment obligations of Borrower, if
any, under any interest rate protection agreement (including, without
limitation, any interest rate swaps, caps, floors, collars or similar
agreements) and similar agreements.


 


“Partial Defeasance” has the meaning set forth in Section 2.7.


 


“Partial Defeasance Amount” has the meaning set forth in Section
2.17


 


“Partial Defeasance Collateral” shall mean U.S. Obligations,
which provide payments (i) on or prior to, but as close as possible to, all
Payment Dates and other scheduled payment dates, if any, under the Defeased
Note after the Defeasance Date and up to and including the Scheduled Maturity
Date, and (ii) in amounts equal to or greater than the respective Scheduled
Defeasance Payments related to such Payment Dates.


 


“Partial Release” has the meaning set forth in Section 2.17.


 


“Partial Release Property” has the meaning set forth in Section
2.17.


 


“Payment Date” has the meaning provided in Section 2.5(a).


 


“Payment Intangibles” means all of Borrower’s right, title and
interest, whether now owned or hereafter acquired, in, to and under all
“payment intangibles” as defined in the UCC.


 


15

















 


“PBGC” means the Pension Benefit Guaranty Corporation
established under ERISA, or any successor thereto.


 


“Permits” means all licenses, permits, variances and
certificates required by Legal Requirements to be obtained by Borrower and used
in connection with the ownership, operation, use or occupancy of the Mortgaged
Property (including, without limitation, certificates of occupancy, building
permits, business licenses, state health department licenses, licenses to
conduct business and all such other permits, licenses and rights, obtained from
any Governmental Authority or private Person concerning ownership, operation,
use or occupancy of the Mortgaged Property).


 


“Permitted Encumbrances” means, with respect to the Mortgaged
Property, collectively, (i) the Lien created by the related Mortgages, or any
other Loan Documents of record encumbering each Mortgaged Property, (ii) all
Liens and other matters disclosed on the Title Insurance Policy concerning each
Mortgaged Property, (iii) Liens, if any, for Impositions imposed by any
Governmental Authority not yet delinquent or being contested in good faith and
by appropriate proceedings in accordance with Section 5.1(b)(ii) hereof
and the related Mortgages, (iv) mechanic’s or materialmen’s Liens, if any,
being contested in good faith and by appropriate proceedings in accordance with
Section 5.1(b)(ii) hereof and the related Mortgages, provided that no
foreclosure has been commenced by the lien claimant, (v) rights of existing and
future tenants and residents as tenants only pursuant to Leases, (vi) Liens for
public utilities and (vii) claims against Homesites incurred by tenants or
other occupants of the Mortgaged Property which claims, to the extent they
affect the Mortgaged Property, are contested in good faith and by appropriate
proceedings in accordance with Section 5.1(b)(ii) hereof, which Liens
and encumbrances referred to in clauses (i)-(vii) above do not materially and
adversely affect (1) the ability of Borrower to pay in full the Principal
Indebtedness and interest thereon in a timely manner or (2) the use of any
Mortgaged Property for the use currently being made thereof, the operation of
any Mortgaged Property as currently being operated.


 


“Permitted Investments” means any one or more of the following
obligations or securities acquired at a purchase price of not greater than par:


 


(i)            obligations
of, or obligations fully guaranteed as to payment of principal and interest by,
the United States or any agency or instrumentality thereof provided such
obligations are backed by the full faith and credit of the United States of
America;


 


(ii)           obligations
of the following United States of America government sponsored agencies,
provided such obligations are backed by the full faith and credit of the United
States of America: Federal Home Loan Mortgage Corp. (debt obligations), the
Farm Credit System (consolidated systemwide bonds and notes), the Federal Home
Loan Banks (consolidated debt obligations), the Federal National Mortgage
Association (debt obligations), the Financing Corp. (debt obligations), and the
Resolution Funding Corp. (debt obligations);


 


(iii)          federal
funds, unsecured certificates of deposit, time deposits, bankers’ acceptances
and repurchase agreements with maturities of not more than 365 days of any


 


16

















 


bank, the short-term obligations of which are rated in the highest
short-term rating category by the Rating Agencies;


 


(iv)          certificates
of deposit, time deposits, demand deposits or banker’s acceptances issued by
any depository institution or trust company incorporated under the laws of the
United States or of any state thereof and subject to supervision and
examination by federal and/or state banking authorities, the short-term
obligations of which are rated in the highest short-term rating category by the
Rating Agencies, which investments are fully insured by the Federal Deposit
Insurance Corp.;


 


(v)           debt
obligations with maturities of not more than 365 days and rated by the Rating
Agencies in its highest long-term unsecured rating category;


 


(vi)          commercial
paper (including both non-interest-bearing discount obligations and
interest-bearing obligations payable on demand or on a specified date not more
than one year after the date of issuance thereof) with maturities of not more
than 270 days and that is rated by the Rating Agencies in their highest
short-term unsecured debt rating; and


 


(vii)         any
other demand, money market or time deposit, demand obligation or any other
obligation, security or investment, which Lender shall have approved in writing
and for which Borrower shall have delivered a Rating Confirmation;


 


provided, however, that (A) the investments
described in clauses (i) through (vii) above must have a predetermined fixed
dollar of principal due at maturity that cannot vary or change, (B) if such
investments have a variable rate of interest, such interest rate must be tied
to a single interest rate index plus a fixed spread (if any) and must move
proportionately with that index, (C) such investments must not be subject to
liquidation prior to their maturity or have an “r” highlighter affixed to its
rating by S&P, and (D) such investments must not be subject to liquidation
prior to their maturity; and provided, further, that, in the
judgment of Lender, such instrument continues to qualify as a “cash flow
investment” pursuant to Code Section 860G(a)(6) earning a passive return in the
nature of interest and that no instrument or security shall be a Permitted
Investment if such instrument or security evidences (x) a right to receive only
interest payments or (y) the right to receive principal and interest payments
derived from an underlying investment at a yield to maturity in excess of 120%
of the yield to maturity at par of such underlying investment.


 


“Permitted Transfer” means any conveyance, assignment, sale or
other disposition (and not a mortgaging, encumbrance, pledging, hypothecation,
or granting of a security interest) (directly or indirectly) of not more than
49% of the voting and beneficial ownership interests in any legal entity
comprising Borrower or the Member following which Affordable Residential
Communities LP (i) owns (directly or indirectly) 51% or more of such voting and
beneficial ownership interests in each legal entity comprising Borrower and
(ii) controls the operations and management of Borrower; provided, that
any such Transfer referred to above which takes the form of a Transfer of the
equity ownership interests in any legal entity comprising Borrower or the
Member to a transferee which (collectively amongst itself and its Affiliates
that own such equity ownership interests) acquires (directly or indirectly) a
greater than 49% ownership interest


 


17

















 


in such legal entity comprising
Borrower or the Member, or which acquires control over the operations and
management of such legal entity comprising Borrower or the Member, shall not be
permitted unless, in addition to satisfaction of the conditions set forth in
clauses (i) and (ii) of this definition above, Borrower delivers to Lender (1)
a substantive non-consolidation opinion in form and substance reasonably
acceptable to Lender and the Rating Agencies, if required by Lender or the
Rating Agencies and (2) a Rating Confirmation.


 


“Person” means any individual, corporation, limited liability
company, partnership, joint venture, estate, trust, unincorporated association,
any federal, state, county or municipal government or any bureau, department or
agency thereof and any fiduciary acting in such capacity on behalf of any of
the foregoing.


 


“Personalty” means all right, title and interest of Borrower in
and to all Equipment, Inventory, Accounts, General Intangibles, Instruments,
Investment Property, Receivables, Pledged Accounts, Deposit Accounts, Contracts
and Intellectual Property and all other personal property as defined in the
relevant UCC, now owned or hereafter acquired by Borrower and now or hereafter
affixed to, placed upon, used in connection with, arising from or otherwise
related to the Mortgaged Property or which may be used in or relating to the
planning, development, financing or operation of such Mortgaged Property, including,
without limitation, furniture, furnishings, equipment, machinery, money,
insurance proceeds, accounts, contract rights, trademarks, goodwill, chattel
paper, documents, trade names, licenses and/or franchise agreements, rights of
Borrower under leases of fixtures or other personal property or equipment,
inventory, all refundable, returnable or reimbursable fees, deposits or other
funds or evidences of credit or indebtedness deposited by or on behalf of
Borrower with any governmental authorities, boards, corporations, providers of
utility services, public or private, including specifically, but without
limitation, all refundable, returnable or reimbursable tap fees, utility
deposits, commitment fees and development costs.


 


“Plan” means an employee benefit or other plan, other than a
Multiemployer Plan, that is covered by Title IV of ERISA or Section 302 of
ERISA or Section 412 of the Code, and (i) was established or maintained by
Borrower or any ERISA Affiliate during the five year period ended prior to the
date of this Agreement or to which Borrower or any ERISA Affiliate makes, is
obligated to make or has, within the five year period ended prior to the date
of this Agreement, been required to make contributions or (ii) with respect to
which Borrower could reasonably be expected to incur liability.


 


“Pledged Accounts” means the Local Collection Account(s), the
Collection Account, the Reserve Accounts, the Loss Proceeds Account, the
Security Deposit Account, the Master Lease Deposit Account, any additional accounts
now or hereafter maintained by or on behalf of Borrower hereunder and any
sub-accounts of any of the foregoing and any successor accounts to any of the
foregoing.


 


“Policies” has the meaning provided in Section 5.1(x)(iii).


 


“Pre-existing Condition” has the meaning set forth in Section
5.1(x)(iii)(B) hereof.


 


18

















 


“Principal Indebtedness” means the principal amount of the Loan
outstanding as adjusted by each increase (including advances made by Lender to
protect the Collateral), or decrease in such principal amount of the Loan
outstanding, whether as a result of prepayment or otherwise, from time to time.


 


“Prepaid Rent Account” has the meaning provided in 2.13(d).


 


“Prepayment Consideration” has the meaning set forth in Section
2.6(c) hereof.


 


“Proceeds” shall have the meaning given in the UCC and, in any
event, shall include, without limitation, all of Borrower’s right, title and
interest in and to proceeds, product, offspring, rents, profits or receipts, in
whatever form, arising from the Collateral.


 


“Prohibited Person” has the meaning set forth in Section
4.1(v) hereof.


 


“Property Expenses” means, with respect to the Mortgaged
Property, the following costs and expenses but only, in the case of costs and
expenses in respect of goods and services, to the extent that they (x) are paid
to Persons who are generally in the business of providing such goods and
services, (y) are customary for the types of goods or services provided in the
geographical area in which such goods or services are provided and (z) do not
constitute Capital Improvement Costs:


 


(i)            Impositions;


 


(ii)           insurance
premiums for policies of insurance required to be maintained by Borrower
pursuant to this Agreement or the other Loan Documents or otherwise maintained
by Borrower or an Affiliate of Borrower on behalf of Borrower in the ordinary
course of business with respect to the Mortgaged Property;


 


(iii)          the
cost of all electricity, oil, gas, water, steam, heat, ventilation, air
conditioning and any other energy, utility or similar item and overtime
services with respect to the Mortgaged Property;


 


(iv)          payments
required under service contracts for any services or items used at the
Mortgaged Property or otherwise used in the operation of the Mortgaged Property
(including, without limitation, service contracts for heating, ventilation and
air conditioning systems, elevators, landscape maintenance, pest extermination,
security, furniture, trash removal, answering service and credit checks);


 


(v)           wages,
benefits, payroll taxes, uniforms, the cost of cleaning supplies and all
related expenses for on-site personnel directly involved in the day-to-day
operation of the Mortgaged Property (including, without limitation, full time,
part time, or seasonal employees, allocated between a number of properties and
general repair, maintenance and security employees), whether hired by Borrower,
Manager or any other Person;


 


(vi)          costs
required in connection with the enforcement of any Lease (including, without
limitation, reasonable attorneys’ fees, charges for lock changes and storage
and moving expenses for furniture, fixtures and equipment);


 


19

















 


(vii)         advertising
and rent-up expenses (including, without limitation, leasing services, tenant
rent concessions, promotions for existing and prospective tenants, banners and
signs);


 


(viii)        out-of-pocket
cleaning, maintenance and repair expenses;


 


(ix)           any
expense the total cost of which is passed through to tenants pursuant to
executed Leases;


 


(x)            legal,
accounting, auditing and other professional fees and expenses incurred in
connection with the ownership, leasing and operation of the Mortgaged Property
(including, without limitation, collection costs and expenses);


 


(xi)           permits,
licenses and registration fees and costs;


 


(xii)          any
expense necessary in order to prevent a breach under a Lease;


 


(xiii)         any
expense necessary in order to prevent or cure a violation of any Legal
Requirement (including Environmental Law), regulation, code or ordinance;


 


(xiv)        costs
and expenses of any appraisals, valuations, surveys, inspections, environmental
assessments or market studies, zoning reports;


 


(xv)         costs
and expenses of security and security systems provided to and/or installed and
maintained with respect to the Mortgaged Property;


 


(xvi)        costs
of title, UCC, litigation and other searches and costs of maintaining the Lien
of the Mortgages thereon and the security interest in any related Collateral;


 


(xvii)       fees
and expenses of property managers contracted with by Borrower to perform
management, administrative, payroll or other services in connection with the
operation of the Mortgaged Property (including, without limitation, the fees
and expenses owed to Manager under any Management Agreement which the Lender
has approved in accordance with this Agreement);


 


(xviii)      any
other costs and expenses contemplated by the Operating Budget and customarily
incurred in connection with operating properties similar in type and character
to the Mortgaged Property; and


 


(xix)         any
other category of property expense that is customary for a property of the type
and size as the Mortgaged Property and is reasonably approved by Lender.


 


“Quarterly Statement” has the meaning provided in Section
2.12(e).


 


“Rating Agencies” means at least two of Fitch, Moody’s and
S&P (or, if a Secondary Market Transaction has occurred in which Securities
have been issued, each of the foregoing that rated such Securities).


 


20

















 


“Rating Criteria” with respect to any Person, means that (i) the
short-term unsecured debt obligations of such Person are rated at least “A-1”
by S&P, “P-1” by Moody’s and “F-1” by Fitch, if deposits are held by such
Person for a period of less than one month, or (ii) the long-term unsecured
debt obligations of such Person are rated at least “AA-” by S&P, “Aa3” by
Moody’s and “AA-” by Fitch, if deposits are held by such Person for a period of
one month or more.


 


“Rating Confirmation” with respect to any transaction, matter or
action in question, means: (i) if all or any portion of the Loan, by itself or
together with other loans, has been the subject of a Secondary Market
Transaction, the written confirmation of the Rating Agencies that such transaction,
matter or action shall not, in and of itself, result in the downgrading,
withdrawal or qualification of the then-current ratings assigned to any of the
Securities issued in connection with a Secondary Market Transaction; and (ii)
if any portion of the Loan has not been the subject of a Secondary Market
Transaction, Lender shall have determined in its reasonable discretion (taking
into consideration such factors as Lender may determine, including the
attributes of the loan pool in which any portion of the Loan reasonably be
expected to be securitized) that no rating for any Securities that would be
issued in connection with a Secondary Market Transaction involving any of such
portion of the Loan would be downgraded, qualified, or withheld by reason of such
transaction, matter or action.


 


“Real Estate Taxes Escrow Account” has the meaning provided in Section
2.13(b).


 


“Receivables” means all of Borrower’s right, title and interest,
whether now owned or hereafter acquired, in, to and under (i) any Accounts, Chattel
Paper, Instruments, Payment Intangibles, Letter of Credit Rights, Documents,
insurance policies, drafts, bills of exchange, trade acceptances, notes or
other indebtedness owing to Borrower from whatever source arising, (ii) to the
extent not otherwise included above, (a) all income, Rents, issues, profits,
revenues, deposits and other benefits from the Mortgaged Property and (b) all
receivables and other obligations now existing or hereafter arising, or created
out of the sale, lease, sublease, license, concession or other grant of the
right of the use and occupancy of property or rendering of services by Borrower
or any operator or manager of the Mortgaged Property or other commercial space
located at the Mortgaged Property or acquired from others (including, without
limiting the generality of the foregoing, from rental of space, halls, stores,
and offices, and deposits securing reservations of such space, exhibit or sales
space of every kind, license, lease, sublease and concession fees and rentals,
wholesale and retail sales of merchandise, service charges, vending machine
sales and proceeds, if any, from business interruption or other loss of income
insurance, (iii) all of the books and records (whether in tangible, electronic
or other form) now or hereafter maintained by or on behalf of Borrower in
connection with the operation of the Mortgaged Property or in connection with
any of the foregoing and (iv) all Supporting Obligations and all liens and
security interests securing any of the foregoing and all other rights,
privileges and remedies relating to any of the foregoing.


 


“Release” means any active or passive release, spill, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching
or migration into the indoor or outdoor environment (including, without
limitation, the movement of Hazardous Substances through ambient air, soil,
surface water, ground water, wetlands, land or subsurface strata).


 


21

















 


“Remedial Work” has the meaning set forth in Section
5.1(d)(i).


 


“Rents” means all income, rents (including base rent), issues,
profits, revenues (including all oil and gas or other mineral royalties and
bonuses), deposits (other than utility and security deposits) and other benefits
from the Mortgaged Property.


 


“Replacement Reserve Account” has the meaning set forth in Section
2.13(a).


 


“Replacement Reserve Deposit Amount” means an amount equal to
one-twelfth (1/12th) of the product of $50.00 and the number of
Homesites at the Mortgaged Property; provided, that, notwithstanding the
foregoing, in the event the Lender determines in its reasonable discretion that
an increase in such amount is necessary to maintain proper operation of the
Mortgaged Properties, then upon not less than thirty (30) days prior written
notice to the Borrower, the Lender may increase the aforementioned amount based
upon its reassessment of the amount necessary for Capital Improvement Costs
from time to time.


 


“Replacement Reserve Threshold Amount” means the product of
$50.00 (or such higher amount as the Lender shall reasonably determine pursuant
to the proviso to the definition of Replacement Reserve Deposit Amount) and the
number of Homesites at the Mortgaged Property.


 


“Reserve Account(s)” means the Deferred Maintenance Escrow
Account, the Replacement Reserve Account, the Real Estate Taxes Escrow Account,
the Insurance Escrow Account, the Operating Expense Account, Working Capital
Reserve Account, the Debt Service Reserve Account and the Prepaid Rent Account,
collectively, and any successor accounts to any of the foregoing.


 


“Restoration” has the meaning set forth in Section
5.1(x)(iii)(B).


 


“Scheduled Defeasance Payments” shall mean scheduled payments of
interest and principal under the Note in the case of a Total Defeasance and
under the Defeased Note in the case of a Partial Defeasance for all Payment
Dates occurring after the Defeasance Date and up to and including the Scheduled
Maturity Date (including, in the case of a Total Defeasance, the outstanding
principal balance of the Loan as of the Scheduled Maturity Date and, in the
case of a Partial Defeasance, the outstanding principal balance of the Defeased
Note as of the Scheduled Maturity Date), and all payments required after the
Defeasance Date, if any, under the Loan Documents for servicing fees, and other
similar charges.


 


“Scheduled Maturity Date” mean March 1, 2009.


 


“S&P” shall mean Standard & Poor’s Rating Services, a
division of The McGraw-Hill Companies, Inc and its successors.


 


“Secondary Market Transaction” has the meaning set forth in Section
5.1(w).


 


“Security Agreement” shall mean a security agreement in form and
substance that would be satisfactory to a prudent lender pursuant to which
Borrower grants Lender a perfected,


 


22

















 


first priority security
interest in the Defeasance Collateral Account and the Defeasance Collateral.


 


“Securities” means mortgage pass-through certificates or other
securities issued in a Secondary Market Transaction and evidencing a beneficial
interest in or secured in whole or in part by the Loan in a rated or unrated
public offering or private placement.


 


“Security Deposit Account” has the meaning set forth in Section
2.12(a)(i).


 


“Side Agreement” means that certain Side Agreement dated as of
the date hereof, by and among Guarantor, Borrower and Lender.


 


“Single Member” has the meaning set forth in Section 8.1(ee).


 


“Supporting Obligations” means all of Borrower’s right, title
and interest, whether now owned or hereafter acquired, in, to and under (i) all
“supporting obligations” as defined in the UCC and (ii) any other guarantee,
letter of credit, secondary obligation, right or privilege that supports or
pertains to any of the Mortgaged Property.


 


“Survey” means a certified ALTA/ACSM survey of each Mortgaged
Property prepared by a registered Independent surveyor, containing the form of
survey or certification provided to Borrower by Lender and in form and content
reasonably satisfactory to Lender and the company issuing the Title Insurance
Policy for each Mortgaged Property.


 


“Taking” means a taking or voluntary conveyance during the term
hereof of all or part of any Mortgaged Property, or any interest therein or
right accruing thereto or use thereof, as the result of, or in settlement of,
any condemnation or other eminent domain proceeding by any Governmental
Authority affecting the Mortgaged Property or any portion thereof whether or
not the same shall have actually been commenced.


 


“Tax Liabilities” has the meaning set forth in Section
2.10(a) hereof.


 


“Title Insurance Policy” means a mortgagee’s title insurance
policy or policies (i) issued by one or more title companies reasonably
satisfactory to Lender which policy or policies shall (unless Lender otherwise
requires or consents) be in form ALTA 1992, where available (with waiver of
arbitration provisions), naming Lender as the insured party, (ii) insuring the
Mortgages as being a first and prior lien upon the Mortgaged Property, (iii)
showing no encumbrances against any Mortgaged Property (whether junior or
superior to the Mortgages) which are not reasonably acceptable to Lender other
than Permitted Encumbrances, (iv) in an amount reasonably satisfactory to
Lender (it being understood and agreed that because multiple Mortgaged
Properties secure the Loan, a reasonable requirement shall be deemed to include
requiring title insurance for a Mortgaged Property in the amount of the
allocated loan amount (as reasonably determined by Lender) for such Mortgaged
Property if a tie-in endorsement is available in the State where such Mortgaged
Property is located or 125% of the appraised value of a Mortgaged Property if a
tie-in endorsement is not available in the State where such Mortgaged Property
is located or such Mortgaged Property cannot be tied together with other
Mortgaged Properties for any reason), and (v) otherwise in form and content
reasonably acceptable to Lender.  Such
Title Insurance Policy shall include the following endorsements or


 


23

















 


affirmative coverages in form
and substance reasonably acceptable to Lender, to the extent available in the
jurisdiction in which the Land is located: variable rate endorsement; survey
endorsement; comprehensive endorsement; zoning (ALTA 3.1 with parking added)
endorsement; first loss, last dollar and tie-in endorsement; access coverage;
separate tax parcel coverage; contiguity (if applicable) coverage; and such
other endorsements as Lender shall reasonably require with respect to a particular
Mortgaged Property in order to provide insurance against specific risks
identified by Lender in connection with the Mortgaged Property.


 


“Total Defeasance” shall have the meaning set forth in Section
2.3.


 


“Total Defeasance Collateral” shall mean U.S. Obligations, which
provide payments (i) on or prior to, but as close as possible to, all Payment
Dates and other scheduled payment dates, if any, under the Note after the
Defeasance Date and up to and including the Scheduled Maturity Date, and (ii) in
amounts equal to or greater than the respective Scheduled Defeasance Payments
related to such Payment Dates.


 


“Transaction” means the transactions contemplated by the Loan
Documents.


 


“Transaction Costs” means all costs and expenses paid or payable
by Borrower relating to the Transaction (including, without limitation,
appraisal fees, legal fees and accounting fees and the costs and expenses
described in Section 9.23).


 


“Transfer” means the conveyance, assignment, sale, mortgaging,
encumbrance (other than a Permitted Encumbrance), pledging, hypothecation,
granting of a security interest in, granting of options with respect to, or
other disposition of (directly or indirectly, voluntarily or involuntarily, by
operation of law or otherwise, and whether or not for consideration or of
record) all or any portion of any direct or indirect (irrespective of the
number of tiers of ownership) legal or beneficial interest (a) in all or any
portion of the Mortgaged Property; or (b) any stock, partnership interests, membership
interests or other ownership interests in Borrower or the Member or the
constituent entities directly or indirectly (irrespective of the number of
tiers of ownership) owning any such stock, partnership interests, membership
interests or other ownership interests. 
A Transfer shall also include, without limitation to the foregoing, the
following: an installment sales agreement wherein Borrower agrees to sell the
Mortgaged Property or any part thereof or any interest therein for a price to
be paid in installments; an agreement by Borrower leasing all or a substantial
part of the Mortgaged Property to one or more Persons pursuant to a single or
related transactions, or a sale, assignment or other transfer of, or the grant
of a security interest in, Borrower’s right, title and interest in and to any
Leases or any Rent; execution or consent by Borrower of any instrument
subjecting the Mortgaged Property to a condominium regime or transferring
ownership to a cooperative corporation; and any change of control of Borrower
or the Member.


 


“Treasury Rate” means, on the date on which such rate is
calculated, the yield on the ten year “on the run” U.S. Treasury issue (primary
issue) with such yield being based on the bid price for such issue as
reasonably determined by Lender.


 


“UCC” means with respect to any Collateral, the Uniform
Commercial Code as in effect from time to time in the State of New York; provided,
that if by reason of mandatory


 


24

















 


provisions of law, the
perfection or the effect of perfection or non-perfection or priority of the
security interest in any item or portion of the Collateral is governed by the
Uniform Commercial Code as in effect in a jurisdiction other than the State of
New York, “UCC” shall mean the Uniform Commercial Code as in effect in such
other jurisdiction for purposes of the provisions hereof relating to such
perfection or effect of perfection or non-perfection or priority.  Wherever this agreement refers to terms as
defined in the UCC, if such term is defined in more than one Article of the
UCC, the definition in Article 9 of the UCC shall control.


 


“UCC Searches” has the meaning set forth in Section 3.1(v)
hereof.


 


“Undefeased Note” has the meaning set forth in Section 2.7.


 


“Underwritten Net Cash Flow” means, as of any date of
calculation with respect to the Mortgaged Property, (i) the Operating Revenues
calculated based upon the base rent portion of the Rents during the most recent
three month period for which such information was furnished to Lender pursuant
to Section 5.1(r)(v) hereof, annualized, plus (ii) any utility and other
income during the most recent twelve month period for which such information
was furnished to Lender pursuant to Section 5.1(r)(v) hereof, minus
(iii) the Operating Expenses with respect to the Mortgaged Property during the
most recent twelve month period for which such information was furnished to
Lender pursuant to Section 5.1(r)(v) hereof, each as determined by
Lender and after Lender makes adjustments, if necessary, for


 


(1)           expenses
for management fees equal to the greater of actual management fees or 5.00% of
Operating Revenues for such period,


 


(2)           a
minimum vacancy allowance equal to 5.00%,


 


(3)           an
annual minimum capital expenditure reserve equal to the product of $50.00
multiplied by the total number of Homesites at the Mortgaged Property,


 


(4)           exclusion
of rental income and expenses from manufactured homes owned by Borrower,


 


(5)           exclusion
of any other revenue items reasonably deemed nonrecurring by Lender, and


 


(6)           inclusion
of increases in future operating costs as determined by Lender, in its sole
discretion, so that, assuming current occupancy, the annualized underwritten
Operating Expenses fully reflect the operating costs expected to be incurred
over the next twelve month period.


 


“U.S. Obligations” shall mean securities that are (i) direct
obligations of the United States of America for the full and timely payment of
which its full faith and credit is pledged or (ii) obligations of an entity controlled
or supervised by and acting as an agency or instrumentality and guaranteed as a
full faith and credit obligation which shall be fully and timely paid by the
United States of America, which in either case are not callable or redeemable
at the option of the issuer thereof (including a depository receipt issued by a
bank (as defined in Section 3(a)(2) of the United States Securities Act)) as
custodian with respect to any such U.S.


 


25

















 


Obligations or a specific
payment of principal of or interest on any such U.S. Obligations held by such
custodian for the account of the holder of such depository receipt, provided
that (except as required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depository receipt from
any amount received by the custodian in respect of the securities or the
specific payment of principal of or interest on the securities evidenced by
such depository receipt.


 


“Use” means, with respect to any Hazardous Substance, the
generation, manufacture, processing, distribution, handling, use, treatment,
recycling or storage of such Hazardous Substance or transportation of such
Hazardous Substance in connection with or affecting Borrower or the Mortgaged
Property.


 


“Welfare Plan” means an employee welfare benefit plan as defined
in Section 3(1) of ERISA established or maintained by Borrower or any ERISA
Affiliate or with respect to which Borrower or any ERISA Affiliate has an
obligation to make contributions and covers any current or former employee of
Borrower or any ERISA Affiliate.


 


“Working Capital Budget” means, with respect to any Fiscal Year,
the component of the Operating Budget for such fiscal year submitted by
Borrower to Lender in accordance with the provisions of Section 5.1(r)(viii)
which sets forth, for each calendar month or other applicable time period, the
amount of the working capital reserve budgeted for such time period and changed
thereto over the course of such budget period (such working capital reserve
amount for any given time period is herein referred to as the “Working
Capital Reserve Amount”).


 


“Working Capital Reserve Account” has the meaning set forth in Section
2.13(d) hereof.


 


“Working Capital Reserve Amount” has the meaning set forth in
the definition of Working Capital Budget.


 


ARTICLE II.

GENERAL TERMS


 


Section 2.1.            The
Loan.


 


(a)           Subject to the terms
and conditions of this Agreement, Lender shall lend to Borrower on the Closing
Date the Loan Amount.  The proceeds of
the Loan shall be used solely for the purposes identified in Section 2.2
hereof.  Lender is hereby authorized to
fund directly from the proceeds of the Loan advanced at Closing (net of any
deposits or payments made by Borrower or its Affiliates prior to Closing) (i)
the Origination Fee, (ii) the deposits to the Deferred Maintenance Escrow
Account, the Real Estate Taxes Escrow Account, the Insurance Escrow Account and
the Replacement Reserve Account required to be funded from Loan proceeds pursuant
to Section 2.13, (iii) the out-of-pocket expenses incurred by Lender in
connection with the origination and funding of the Loan and (iv) the reasonable
fees and expenses of Lender’s and Borrower’s counsel.


 


(b)           The Loan shall
constitute one general obligation of Borrower to Lender and shall be secured by
the security interest in and Liens granted upon all of the Collateral, and


 


26

















 


by all other security interests and Liens at
any time or times hereafter granted by Borrower to Lender as security for the
Loan.


 


Section 2.2.            Use of
Proceeds.  Proceeds of the Loan
shall be used only for the following purposes: 
(a) to, with respect to certain of the Mortgaged Property, finance a
portion of the acquisition cost of, and, with respect to other of the Mortgaged
Property, refinance existing mortgage debt at such Mortgaged Property, (b) to
pay to Lender the Origination Fee, (c) to make the required deposits to the
Deferred Maintenance Escrow Account, the Real Estate Taxes Escrow Account, the
Insurance Escrow Account and the Replacement Reserve Account, (d) to pay
Transaction Costs (including the reasonable out-of-pocket expenses incurred by
Lender in connection with the origination and funding of the Loan) and (e) to pay
reasonable fees, expenses and disbursements of Lender’s and Borrower’s
counsel.  Any proceeds of the Loan in
excess of the amounts applied in accordance with Sections 2.1(a) and 2.2(a)-(e)
may be used by the Borrower for its general purposes (including to make a
distribution to the Member).


 


Section 2.3.            Security
for the Loan.  The Note and
Borrower’s obligations hereunder and under all other Loan Documents shall be
secured by (a) Liens upon the Mortgaged Property pursuant to the Mortgages, (b)
the Contract Assignment, (c) the Manager’s Subordination, (d) the Assignment of
Rents and Leases, and all other security interests and Liens granted in this
Agreement and in the other Loan Documents.


 


Section 2.4.            Borrower’s
Note.  Borrower’s obligation to pay
the principal of and interest on the Loan and all other amounts due under the
Loan Documents shall be evidenced initially by the Note, duly executed and
delivered by Borrower on the Closing Date. 
The Note shall be payable as to principal, interest and all other
amounts due under the Loan Documents, as specified in this Agreement, with a
final maturity on the Maturity Date. 
Lender shall have the right to have the Note subdivided, by exchange for
promissory notes of lesser denominations in the form of the initial Note, upon
written request to Borrower and, in such event, Borrower shall promptly execute
additional or replacement Notes, at the Lender’s sole expense with respect to
Borrower’s reasonable out-of-pocket costs in the event and to the extent
Borrower incurs costs in connection therewith other than in connection with the
execution of such additional or replacement Notes.  At no time shall the aggregate original principal amount of the
Note (or of such replacement Notes) exceed the Loan Amount.


 


Section 2.5.            Principal
and Interest.


 


(a)           Interest on the Loan
shall accrue at the rate set forth in Section 2.5(b) below commencing on
the Closing Date.  Borrower shall make a
payment to Lender of interest only on the Closing Date for the period from the
Closing Date through the last day of the calendar month in which the Closing
Date occurs.  Commencing on the first
day of the second calendar month following the calendar month in which the
Closing Date occurs (the “First Payment Date”) and on the first day of
each calendar month thereafter (each, with the First Payment Date, a “Payment
Date”), Borrower shall make equal monthly payments (each, a “Monthly
Debt Service Payment”) of principal and interest in the amount of
$134,705.85 (the “Monthly Debt Service Payment Amount”).  The entire outstanding Principal
Indebtedness of the Loan and the Note, together with all accrued but unpaid
interest thereon and all other amounts due under the Loan Documents, shall be
due and payable by Borrower to Lender on the


 


27

















 


Maturity Date.  Interest shall be computed on the basis of a 360 day year and the
actual number of days elapsed during any month or other accrual period.


 


(b)           The Principal
Indebtedness shall bear interest at a rate per annum equal to 5.05%,
increasing, however, to the Default Rate while an Event of Default has occurred
and is continuing, as provided in Section 2.5(c) below.


 


(c)           While an Event of
Default has occurred and is continuing, Borrower shall pay to Lender interest
at the Default Rate on any amount owing to Lender not paid when due until such
amount is paid in full.


 


(d)           If any payment of
principal, interest or other sums shall not be made to Lender on the date the
same is due hereunder or under any of the other Loan Documents, then Borrower
shall pay to Lender, in addition to all sums otherwise due and payable, a late
fee in an amount equal to five percent (5.0%) of such principal, interest or
other sums due hereunder (other than the entire principal balance of the Loan
due upon acceleration of the Loan or upon Maturity) or under any other Loan
Document (or, in the case of a partial payment, the unpaid portion thereof),
such late charge to be immediately due and payable without demand by Lender.


 


(e)           Notwithstanding any
provision to the contrary contained in this Agreement or the other Loan
Documents, Borrower shall not be required to pay, and Lender shall not be
permitted to collect, any amount of interest in excess of the maximum amount of
interest permitted by law (“Excess Interest”).  If any Excess Interest is provided for or determined by a court
of competent jurisdiction to have been provided for in this Agreement or in any
of the other Loan Documents, then in such event: (1) the provisions of this
paragraph shall govern and control; (2) Borrower shall not be obligated to pay
any Excess Interest; (3) any Excess Interest that Lender may have received
hereunder shall be, at Lender’s option, (a) applied as a credit against either
or both of the Principal Indebtedness of the Loan or accrued and unpaid
interest thereunder (not to exceed the maximum amount permitted by law), (b)
refunded to the payor thereof, or (c) any combination of the foregoing; (4) the
interest rate(s) provided for herein shall be automatically reduced to the
maximum lawful rate allowed from time to time under applicable law (the “Maximum
Rate”), and this Agreement and the other Loan Documents shall be deemed to
have been and shall be, reformed and modified to reflect such reduction; and
(5) Borrower shall not have any action against Lender for any damages arising
out of the payment or collection of any Excess Interest.  Notwithstanding the foregoing, if for any
period of time interest on any Indebtedness is calculated at the Maximum Rate
rather than the applicable rate under this Agreement, and thereafter such
applicable rate becomes less than the Maximum Rate, the rate of interest
payable on such Indebtedness shall, to the extent permitted by law, remain at
the Maximum Rate until Lender shall have received or accrued the amount of
interest which Lender would have received or accrued during such period on
Indebtedness had the rate of interest not been limited to the Maximum Rate
during such period.  If the Default Rate
shall be finally determined to be unlawful, then the Maximum Rate shall be
applicable during any time when the Default Rate would have been applicable
hereunder, provided however that if the Maximum Rate is greater than the
applicable interest rate, then the foregoing provisions of this paragraph shall
apply.


 


28

















 


Section 2.6.            Prepayment.


 


(a)           Limitation on
Prepayment; Prepayment Consideration Due on Acceleration.  Borrower shall have no right to prepay the
Loan in whole or part at any time, except as expressly set forth in this Section
2.6(a). Commencing on the First Open Prepayment Date, Borrower may prepay
the Loan in whole, but not in part, without payment of Prepayment
Consideration, provided that (i) Borrower shall provide to Lender not less than
thirty (30) days’ prior written notice of such prepayment, (ii) together with
such prepayment Borrower also shall pay all accrued and unpaid interest and all
other Obligations and (iii) if such prepayment occurs on any day other than a
Payment Date, then together therewith Borrower also shall pay to Lender the
amount of interest that would have accrued on the amount being prepaid from and
including the date of such prepayment to (but excluding) the first day of the
following calendar month. Borrower shall not be required to pay any Prepayment
Consideration with respect to an application of insurance proceeds or
condemnation awards by Lender pursuant to the Loan Agreement or Mortgage in the
absence of an Event of Default.


 


(b)           Prepayment Consideration
Due.  If the Maturity Date shall be
accelerated to a date prior to the Scheduled Maturity Date, or if any
prepayment of all or any portion of the Principal Indebtedness hereunder
occurs, whether in connection with Lender’s acceleration of the unpaid
Principal Indebtedness of the Loan or in any other circumstances whatsoever, or
if the Mortgage is satisfied or released by foreclosure (whether by power of
sale or judicial proceeding), deed in lieu of foreclosure or by any other
means, then the Prepayment Consideration shall become immediately due and owing
and Borrower shall forthwith pay the Prepayment Consideration to Lender. The
foregoing shall not create any right of prepayment. Borrower shall have no
right whatsoever to prepay all or any portion of the Principal Indebtedness of
the Note, except as set forth in Section 2.6(a) above.


 


(c)           Definitions.  The following terms shall have the meanings
indicated:


 


The “Prepayment Consideration” shall be the amount equal to the
sum of (i) an amount equal to the interest which would have accrued on the
Principal Indebtedness of the Note during the remaining days of the full
calendar month containing the date (the “Event Date”) which is the
earlier of (x) the date of prepayment of the Loan or (y) such earlier date upon
which the entire remaining Principal Indebtedness of the Loan shall become due
and payable, whether as a result of acceleration of the maturity of the Loan or
otherwise, plus (ii) the greater of (x) four percent of the Loan balance on the
Event Date, or (y) the sum of two percent of the Loan balance on the Event Date
plus an amount equal to the “Present Value Yield Differential”,
calculated as the excess, if any, of (A) the amount of the monthly interest
which would otherwise be payable on the principal balance of this Note from (1)
the date (the “Yield Determination Date”) which is either (xx) the Event
Date (if the required interest payment described in clause (i) above has not
been made through the end of the calendar month in which the Event Date occurs)
or (yy) if the required interest payment described in clause (i) above has been
made through the end of the calendar month in which the Event Date occurs, the
first day of the calendar month following the month containing the Event Date,
through and including (2) the Scheduled Maturity Date, over (B) the amount of
the monthly interest Lender would earn if an amount equal to the Principal
Indebtedness of the Loan as of the Event Date were invested for the period from
the Yield Determination Date through the Scheduled Maturity Date at the Yield
Rate (as hereinafter defined), such difference (the “Yield Differential”)
to be discounted to present value at the Yield Rate using the following
formula:


 


29

















 


	
   

  	
   

  	
  Yield Differential

  
	
  Present Value Yield Differential

  	
  =

  	
  (1 + r)-n

  



 


where:


 


r=                                     Yield Rate, and


 


n=                                  the remaining
Weighted Average Life to Maturity

(as defined below)from the Yield Determination Date.


 


The “Yield Rate” shall be the annualized yield on securities
issued by the United States Treasury having a maturity corresponding to the
then remaining Weighted Average Life to Maturity (as defined below) of this
Note as determined by Payee, as quoted in Federal Reserve Statistical
Release [H. 15(519)] under the heading “U.S. Government Securities -
Treasury Constant Maturities” for the Yield Rate Determination Date (as defined
below), converted to a monthly equivalent yield.  If yields for such securities of such maturity are not shown in
such publication, then the Yield Rate shall be determined by Lender by linear
interpolation between the yields of securities of the next longer and next
shorter maturities. If said Federal Reserve Statistical Release or any other
information necessary for determination of the Yield Rate in accordance with
the foregoing is no longer published or is otherwise unavailable, then the
Yield Rate shall be determined by Payee based on comparable data.  The term “Yield Rate Determination Date”
shall mean the date which is five (5) Business Days prior to the Yield
Determination Date.  The term “Weighted
Average Life to Maturity” shall mean, at any date, the number of years
(including fractional years, expressed as a decimal (e.g., three years and
three moths = 3.25 years)) obtained by dividing (x) the outstanding Principal
Indebtedness of the Loan on the Event Date into (y) the sum total of the
Weighted Amortization Products (as defined below) for each Scheduled Principal
Payment (as defined below).  The “Scheduled
Principal Payment(s)” shall mean each then remaining scheduled principal
payment (assuming no prepayment or Loan acceleration), including payment of the
outstanding principal balance of the Loan on the Scheduled Maturity Date, in
respect of the Loan.  The “Weighted
Amortization Product” for each Scheduled Principal Payment shall mean the
product of (A) the amount of such Scheduled Principal Payment multiplied by (B)
the number of years (including fractional years, expressed as a decimal) which
will elapse between the Yield Determination Date and the date on which such
Scheduled Principal Payment is to be made under this Loan Agreement.


 


Borrower agrees that the Prepayment Consideration required hereunder is
reasonable.  Borrower has given
individual weight to the consideration in this transaction for this waiver and
agreement.


 


Section 2.7.            Defeasance.


 


(a)           Total Defeasance.  Borrower shall have the right at any time
after the First Open Defeasance Date and prior to the First Open Prepayment
Date to obtain a release of the Lien of the Mortgage encumbering the Mortgaged
Property (a “Total Defeasance”) upon satisfaction of the following
conditions:


 


(i)            Borrower
shall provide Lender at least thirty (30) days’ prior written notice (or such
shorter period of time if permitted by Lender in its sole discretion)


 


30

















 


specifying a date (the “Defeasance Date”) on which Borrower
shall have satisfied the conditions in this Section 2.7(a) and on which
it shall effect the Total Defeasance;


 


(ii)           Borrower shall pay
to Lender (A) all payments of interest due on the Loan to and including the
Defeasance Date and (B) all other sums, then due under the Note, this Loan
Agreement, the Mortgage and the other Loan Documents;


 


(iii)          Borrower shall
irrevocably deposit the Total Defeasance Collateral into the Defeasance
Collateral Account and otherwise comply with the provisions of this Section
2.7(a) and Sections 2.7(c) and (d) hereof;


 


(iv)          Borrower shall
execute and deliver to Lender a Security Agreement in respect of the Defeasance
Collateral Account and the Total Defeasance Collateral;


 


(v)           Borrower shall
deliver to Lender an opinion of counsel for Borrower that is customary in
commercial lending transactions and subject only to normal qualifications,
assumptions and exceptions opining, among other things, that (w) Lender has a
legal and valid perfected first priority security interest in the Defeasance
Collateral Account and the Total Defeasance Collateral, (x) if a Securitization
has occurred, the REMIC Trust formed pursuant to such Securitization will not
fail to maintain its status as a “real estate mortgage investment conduit”
within the meaning of Section 860D of the Code as a result of the Total
Defeasance pursuant to this Section 2.7(a), (y) a Total Defeasance
pursuant to this Section 2.7 will not result in a deemed exchange for
purposes of the Code and will not adversely affect the status of the Loan as
indebtedness for federal income tax purposes, (z) delivery of the Total
Defeasance Collateral and the grant of a security interest therein to Lender
shall not constitute an avoidable preference under Section 547 of the
Bankruptcy Code or applicable state law;


 


(vi)          If and to the extent
required by the Rating Agencies, a non-consolidation opinion with respect to
the Successor Borrower;


 


(vii)         Borrower shall
deliver to Lender a confirmation in writing from the applicable Rating Agencies
to the effect that the release of the Mortgaged Property from the Lien of the
Mortgage as contemplated by this Section 2.7(a) and the substitution of
the Total Defeasance Collateral will not result in a downgrading, withdrawal or
qualification of the respective ratings in effect immediately prior to such
defeasance for the Certificates issued in connection with the Securitization
which are then outstanding;


 


(viii)        Borrower shall
deliver an officer’s certificate certifying that the requirements set forth in
this Section 2.7 have been satisfied;


 


(ix)           Borrower shall
deliver a certificate of a nationally recognized public accounting firm
reasonably acceptable to Lender certifying that the Total Defeasance Collateral
will generate monthly amounts equal to or greater than the Scheduled Defeasance
Payments;


 


(x)            Borrower shall
deliver such other certificates, opinions, documents and instruments as Lender
may reasonably request; and


 


31

















 


(xi)           Borrower shall pay
all costs and expenses of Lender incurred in connection with the defeasance,
including Lender’s reasonable attorneys’ fees and expenses and Rating Agency
fees and expenses.


 


If a Total Defeasance occurs and all of the requirements of this Section
2.7 have been satisfied, (i) Lender shall execute any and all documents
required to release the Mortgaged Property from the Lien of the Mortgage and
the Assignment of Leases and the Total Defeasance Collateral, pledged pursuant
to the Security Agreement, shall be the sole source of collateral securing the
Loan.  In connection with any such
release of the Lien, Borrower shall submit to Lender, not less than thirty (30)
days prior to the Defeasance Date (or such shorter time as permitted by Lender
in its sole discretion), a release of Lien (and related Loan Documents) for
execution by Lender. Such release shall be in a form appropriate in the
jurisdiction in which the Mortgaged Property is located and contain standard
provisions protecting the rights of a releasing lender. In addition, Borrower
shall provide all other documentation Lender reasonably requires to be
delivered by Borrower in connection with such release. Borrower shall pay all
costs, taxes and expenses associated with the release of the Lien of the
Mortgage and the Assignment of Leases, including Lender’s reasonable attorneys’
fees.  Except as set forth in this Section
2.7(a)(or in Section 2.7(b) below), no repayment, prepayment or
defeasance of all or any portion of the Loan shall cause, give rise to a right
to require, or otherwise result in, the release of the Lien of the Mortgage on
the Mortgaged Property.


 


(b)           Partial Defeasance.   Borrower shall, as a condition to and only
in connection with a Partial Release of a Partial Release Property after the
First Open Defeasance Date and prior to the First Open Prepayment Date as
provided in Section 2.17 below, have the right to defease a portion of
the Loan (a “Partial Defeasance”) upon satisfaction of the following
conditions:


 


(i)            Borrower
shall provide Lender at least thirty (30) days’ prior written notice (or such
shorter period of time if permitted by Lender in its sole discretion)
specifying a date (the “Partial Defeasance Date”) on which Borrower
shall have satisfied the conditions in this Section 2.7(b) and on which
it shall effect the Partial Defeasance;


 


(ii)           Borrower shall pay
to Lender (A) all payments of interest due on the Loan to and including the
Partial Defeasance Date and (B) all other sums, then due under the Note, this
Loan Agreement, the Mortgage and the other Loan Documents;


 


(iii)          Borrower shall
irrevocably deposit the Partial Defeasance Collateral into the Defeasance
Collateral Account and otherwise comply with the provisions of this Section
2.7(b) and Sections 2.7(c) and (d) hereof;


 


(iv)          Lender shall prepare
(at Borrower’s expense) all necessary documents to modify this Loan Agreement
and to amend and restate the Note and issue two substitute notes, one note
having a principal balance equal to the Partial Defeasance Amount (the “Defeased
Note”), and the other note having a principal balance equal to the excess
of (A) the then-outstanding principal amount of the Loan, over (B) the amount
of the Defeased Note (the “Undefeased Note”). The Defeased Note and
Undefeased Note shall have identical terms as the Note except for the principal
balance and monthly payments.


 


32

















 


The Defeased Note and the Undefeased Note shall be cross defaulted and
cross collateralized unless the Rating Agencies shall require otherwise or
unless a Successor Borrower that is not an Affiliate of Borrower is established
pursuant to Section 2.7(d). A Defeased Note may not be the subject of
any further defeasance;


 


(v)           Borrower shall
execute and deliver to Lender a Security Agreement in respect of the Defeasance
Collateral Account and the Partial Defeasance Collateral;


 


(vi)          Borrower shall
deliver to Lender an opinion of counsel for Borrower that is customary in
commercial lending transactions and subject only to normal qualifications,
assumptions and exceptions opining, among other things, that (w) Lender has a
legal and valid perfected first priority security interest in the Defeasance
Collateral Account and the Partial Defeasance Collateral, (x) if a
Securitization has occurred, the REMIC Trust formed pursuant to such
Securitization will not fail to maintain its status as a “real estate mortgage
investment conduit” within the meaning of Section 860D of the Code as a result
of the Partial Defeasance pursuant to this Section 2.7(b), (y) a Partial
Defeasance pursuant to this Section 2.7 will not result in a deemed
exchange for purposes of the Code and will not adversely affect the status of
the Loan as indebtedness for federal income tax purposes, (z) delivery of the
Partial Defeasance Collateral and the grant of a security interest therein to
Lender shall not constitute an avoidable preference under Section 547 of the
Bankruptcy Code or applicable state law;


 


(vii)         If and to the extent
required by the Rating Agencies, a non-consolidation opinion with respect to
the Successor Borrower;


 


(viii)        Borrower shall
deliver to Lender a confirmation in writing from the applicable Rating Agencies
to the effect that the release of the Partial Release Property from the Lien of
the Mortgage as contemplated by this Section 2.7(b) and the substitution
of the Partial Defeasance Collateral will not result in a downgrading, withdrawal
or qualification of the respective ratings in effect immediately prior to such
defeasance for the Certificates issued in connection with the Securitization
which are then outstanding;


 


(ix)           Borrower shall
deliver an officer’s certificate certifying that the requirements set forth in
this Section 2.7 have been satisfied;


 


(x)            Borrower shall
deliver a certificate of a nationally recognized public accounting firm
reasonably acceptable to Lender certifying that the Partial Defeasance
Collateral will generate monthly amounts equal to or greater than the Scheduled
Defeasance Payments;


 


(xi)           Borrower shall
deliver such other certificates, opinions, documents and instruments as Lender
may reasonably request; and


 


(xii)          Borrower shall pay
all costs and expenses of Lender incurred in connection with the defeasance,
including Lender’s reasonable attorneys’ fees and expenses and Rating Agency
fees and expenses.


 


33

















 


(c)           Defeasance
Collateral Account.  On or before
the date on which Borrower delivers the Defeasance Collateral, Borrower or
Successor Borrower (as applicable) shall open at any Eligible Bank the
defeasance collateral account (the “Defeasance Collateral Account”)
which shall at all times be an Eligible Account. The Defeasance Collateral
Account shall contain only (i) Defeasance Collateral and (ii) cash from
interest and principal paid on the Defeasance Collateral. All cash from
interest and principal payments paid on the Defeasance Collateral shall be paid
over to Lender on each Payment Date and applied to the monthly installments of
interest on the Loan (and in the case of a Partial Defeasance, the portion
thereof evidenced by the Defeased Note) and, upon Maturity, to accrued interest
and the Principal Balance of the Loan (and in the case of a Partial Defeasance,
the portion thereof evidenced by the Defeased Note) Borrower shall cause the
Eligible Bank at which the Defeasance Collateral is deposited to enter an
agreement with Borrower and Lender, satisfactory to Lender in its sole
discretion, pursuant to which such Eligible Bank shall agree to hold and
distribute the Defeasance Collateral in accordance with this Loan Agreement.
Borrower (or Successor Borrower, as applicable) shall be the owner of the Defeasance
Collateral Account and shall report all income accrued on Defeasance Collateral
for federal, state and local income tax purposes in its income tax return.
Borrower shall prepay all costs and expenses associated with opening and
maintaining the Defeasance Collateral Account. Lender shall not in any way be
liable by reason of any insufficiency in the Defeasance Collateral Account.


 


(d)           Successor
Borrower.  In connection with a
Defeasance under this Section 2.7, Borrower shall, if required by the
Rating Agencies or if Borrower so elects or Lender requires, establish or
designate a successor entity (the “Successor Borrower”) which shall be a
single purpose bankruptcy remote entity and which shall be approved by the
Rating Agencies. Any such Successor Borrower may, at Borrower’s option, be an
Affiliate of Borrower unless the Rating Agencies or Lender shall require
otherwise. Borrower shall transfer and assign all obligations, rights and
duties under and to the Note, together with the Defeasance Collateral, to such
Successor Borrower.  Such Successor
Borrower shall assume the obligations under the Note and the Security
Agreement. Borrower shall pay $1,000 to any such Successor Borrower as
consideration for assuming the obligations under the Note and the Security
Agreement. Borrower shall pay all reasonable costs and expenses incurred by
Lender, including Lender’s attorney’s fees and expenses incurred in connection
therewith, and all fees, expenses and other charges of the Rating Agencies.


 


Section 2.8.            Application
of Payments After Event of Default. 
After an Event of Default, Borrower irrevocably waives the right to
direct the application of any and all payments at any time hereafter received
by Lender from or on behalf of Borrower, and Borrower irrevocably agrees that
Lender shall have the continuing exclusive right to apply any and all such
payments and any and all proceeds and recoveries from the Pledged Accounts, the
Mortgaged Property or Borrower after the occurrence and during the continuance
of an Event of Default, in Lender’s sole discretion, to the Indebtedness and
other amounts then outstanding under this Agreement, in such order and manner
as Lender may determine in its sole and absolute discretion, including, without
limitation, reasonable out-of-pocket costs and expenses of Lender reimbursable
pursuant to the terms of this Agreement arising as a result of such repayment,
any accrued and unpaid interest then payable with respect to the Loan or the
portion thereof being repaid, the Principal Indebtedness, any accrued and
unpaid Prepayment Consideration in respect of any such Principal Indebtedness
or the portion thereof being repaid, any other sums then due


 


34

















 


and payable to or for the benefit of Lender pursuant
to this Agreement or any other Loan Document(s), or to Property Expenses and
Capital Improvement Costs for the Mortgaged Property, or to fund Reserve
Accounts.


 


Section 2.9.            Method
and Place of Payment.  Except as
otherwise specifically provided herein, all payments and prepayments under this
Agreement and the Note shall be made to Lender not later than 12:00 p.m.,
Eastern time, on the date when due and shall be made in lawful money of the
United States of America by wire transfer in federal or other immediately
available funds to its account at such bank(s) as Lender may from time to time
designate.  Any funds received by Lender
after such time shall, for all purposes hereof, be deemed to have been paid on
the next succeeding Business Day. 
Lender shall notify Borrower in writing of any changes in the account to
which payments are to be made.  All
payments made by Borrower hereunder, or by Borrower under the other Loan
Documents, shall be made irrespective of, and without any deduction for, any
defenses, set-offs or counterclaims. 
Whenever any payment to be made hereunder shall be stated to be due on a
day that is not a Business Day, the payment may be made on the next succeeding
Business Day.


 


Section 2.10.          Taxes.


 


(a)           All payments made by
or on behalf of Borrower under this Agreement shall be made free and clear of,
and without deduction or withholding for or on account of, any present or
future income, stamp or other taxes, levies, imposts, duties, charges, fees,
deductions or withholdings, now or hereafter imposed, levied, collected,
withheld or assessed by any Governmental Authority (the “Tax Liabilities”),
excluding net income taxes and franchise taxes (imposed in lieu of net income
taxes) imposed on the Lender as a result of a present or former connection
between such Lender and the jurisdiction of the Governmental Authority imposing
such tax or any political subdivision or taxing authority thereof or therein
including being a citizen or resident or national of, or carrying on a business
or maintaining a permanent establishment in such jurisdiction (other than any
such connection arising solely from such Lender’s having executed, delivered or
performed its obligations or received a payment under, or enforced, this
Agreement if, at the time such Lender first became a party to this Agreement,
the applicable Governmental Authority would not have imposed such taxes but
instead such taxes are a result of a change in relevant tax law including, but
not limited to a change in the generally accepted interpretation of existing
tax law).  If Borrower shall be required
by law to deduct any such Tax Liabilities (or amounts in estimation or
reimbursement for the same) from or in respect of any sum payable hereunder to
Lender, then the sum payable hereunder shall be increased (such increase, “additional
amounts”) as may be necessary so that, after making all required
deductions, Lender receives an amount equal to the sum it would have received
had no such deductions been made.


 


(b)           If Lender is not a
“United States person” within the meaning of Section 7701(a)(30) of the Code (a
“Foreign Lender”) Lender shall deliver to Borrower, prior to receipt of
any payment subject to withholding under the Code (or upon accepting an
assignment of an interest herein), two duly signed completed copies of either
Internal Revenue Service (“IRS”) Form W-8BEN or any successor thereto
(relating to Foreign Lender and entitling it to an exemption from, or reduction
of, withholding tax on all payments to be made to Foreign Lender by Borrower
pursuant to this Agreement) or IRS Form W-8ECI or any successor thereto
(relating


 


35

















 


to all payments to be made to Foreign Lender
by Borrower pursuant to this Agreement) or such other evidence satisfactory to
Borrower and Borrower that Foreign Lender is entitled to an exemption from, or
reduction of, U.S. withholding tax, including any exemption pursuant to Section
881(c) of the Code.  If the form W-8BEN
or W-8ECI provided by Lender at the time such Lender first becomes a party to
this Agreement indicates a United States interest withholding tax rate in
excess of zero, withholding tax at such rate shall be considered excluded from
Tax Liabilities reimbursable by Borrower to Lender under Section 2.10(a)
hereof, except to the extent that such Lender’s assignor (if any) was entitled,
at the time of assignment, to receive additional amounts from Borrower pursuant
to Section 2.10(a).  Thereafter and from
time to time, Foreign Lender shall (i) promptly submit to Borrower such
additional duly completed and signed copies of one of such forms (or such
successor forms as shall be adopted from time to time by the relevant United
States taxing authorities) as may then be available under then current United
States laws and regulations to avoid, or such evidence as is satisfactory to
Borrower and Borrower of any available exemption from or reduction of, United
States withholding taxes in respect of all payments to be made to Foreign
Lender by Borrower pursuant to this Agreement, (ii) promptly notify Borrower of
any change in circumstances which would modify or render invalid any claimed
exemption or reduction, and (iii) take such steps as shall not be materially
disadvantageous to it, in the reasonable judgment of such Lender, and as may be
reasonably necessary (including the redesignation of its lending office) to
avoid any requirement of applicable laws that Borrower make any deduction or
withholding for taxes from amounts payable to such Foreign Lender.  Notwithstanding any other provision of this
paragraph, a Foreign Lender shall not be required to deliver any form pursuant
to this paragraph that such Foreign Lender is not legally able to deliver.


 


(c)           If a Lender
transfers its rights and obligations under this Agreement from its lending
office to another lending office, withholding tax (which shall be set forth in
the IRS form or forms described in this Section 2.10 provided by such Lender to
Borrower upon such transfer, taking into account the transfer) imposed on the Lender
after the transfer in excess of the rate imposed prior to such transfer shall
be deemed to be for purposes of this Agreement excluded from Tax Liabilities
reimbursable by Borrower to Lender for periods after the transfer.  This Section 2.10(c) shall not apply
with respect to a change in lending office required for the particular right or
obligation as a result of any change in, or the adoption or phase-in of, any
law, rule or regulation applicable to such Lender and occurring after the date
of this Agreement and the applicable Lender is unable, using commercially
reasonable efforts, to change such lending office to another lending office
that is subject to a lower withholding tax rate.


 


(d)           If any Lender
voluntarily changes its residence or place of business or takes any other
similar action, and the effect of such change or action, as of the date
thereof, would be to increase the Tax Liabilities of such Lender, the Borrower
shall not be obligated to pay any additional amounts in respect of such increase.


 


(e)           If and to the extent
that a Foreign Lender sells a participating interest to a participant which,
pursuant to Section 9.9(a), seeks to obtain the benefits of Section
2.10, then such Foreign Lender shall promptly deliver to Borrower (i) two duly
signed completed copies of the forms or statements required to be provided by
such Lender as set forth above, to establish the portion of any such sums paid
or payable with respect to which such Lender acts for its own account that is
not subject to U.S. withholding tax, and (ii) two duly signed completed copies
of


 


36

















 


IRS Form W-8IMY (or any successor thereto),
together with any information such Lender chooses to transmit with such form,
and any other certificate or statement of exemption required under the Code, to
establish that such Lender is not acting for its own account with respect to a
portion of any such sums payable to such Lender.  Notwithstanding any other provision of this paragraph, a Foreign
Lender shall not be required to deliver any form pursuant to this paragraph
that such Foreign Lender is not legally able to deliver.


 


(f)            For any period with
respect to which a Lender has failed to comply with the requirements of Section
2.10(b), (e) or (h) (other than to the extent such failure is due to a change
in law, rule or regulation occurring subsequent to the date on which a form
originally was required to be provided), Borrower shall not be required to pay
additional amounts to the Lender pursuant to this Section 2.10 with respect to
Tax Liabilities imposed as a result of such failure.


 


(g)           Borrower may,
without reduction, withhold any Tax Liabilities required to be deducted and
withheld from any payment under any of the Loan Documents with respect to which
Borrower is not required to pay additional amounts under this Section 2.10.


 


(h)           Upon Borrower’s
request, if the Lender is a “United States person” within the meaning of
Section 7701(a)(30) of the Code, Lender shall, if and to the extent required by
law, execute and deliver to Borrower an IRS Form W-9.


 


Section 2.11.          Intentionally
Omitted.


 


Section 2.12.          Central
Cash Management.


 


(a)           Local Collection
Accounts; Collection Account; Deposits to and Withdrawals from the Collection
Account.


 


(i)            On
or before the Closing Date, Lender shall (1) establish on behalf of the
Borrower and maintain with the Collection Account Bank a collection account
(the “Collection Account”), which shall be an Eligible Account with a
separate and unique identification number in the name of Lender, as secured
party, or, at Lender’s option, in the name of Borrower for the benefit of
Lender, as secured party, and (2) cause the Collection Account Bank to deliver
to Lender the Collection Account Agreement in form and substance reasonably
acceptable to Lender acknowledging Lender’s security interest in and sole
dominion and control over the Collection Account.  On or before the Closing Date, Borrower may (x) establish and
maintain with one or more financial institutions acceptable to Lender in its
sole reasonable discretion (individually each, and collectively, the “Local
Collection Account Bank”), one or more local collection accounts for the
Mortgaged Property (individually each, and collectively, the “Local
Collection Account”) and one or more security deposit accounts (other than
Master Lease Deposits) for the Mortgaged Property (individually each, and
collectively, the “Security Deposit Account”), each of which shall be an
Eligible Account with a separate and unique identification number and entitled
in the same name as the Collection Account and (y) cause each Local Collection
Account Bank to deliver to Lender a Local Collection Account Agreement in form
and substance reasonably acceptable to Lender acknowledging Lender’s security interest
in and sole dominion and control over each


 


37

















 


Local Collection Account and Security Deposit Account; provided
that Borrower may deposit, hold and administer security deposits (other than
Master Lease Deposits) from that portion of the Mortgaged Property, if any,
located in North Carolina in a Security Deposit Account maintained with Bank of
America, N.A. or other financial institution with a North Carolina branch
reasonably acceptable to Lender, which, it is understood, may not execute a
Local Collection Account Agreement, although Borrower shall make commercially
reasonable efforts to obtain such financial institution’s execution and
delivery of a Local Collection Account Agreement.  On the Closing Date, Borrower shall deposit $225,013.63 in the
Security Deposit Account.  On or before
the Closing Date, Lender shall establish on behalf of Borrower and maintain
with the Collection Account Bank a separate account for Master Lease Deposits
(the “Master Lease Deposit Account”), which shall be an Eligible Account
and shall have the same title as the Collection Account, for the benefit of
Lender until the Loan is paid in full. 
On the Closing Date Borrower shall deposit the amount of the Master
Lease Deposits in the Master Lease Deposit Account.  Subject to Section 2.12(a)(ii), Borrower shall


 


(A)          deposit
or cause the Manager to deposit in the Security Deposit Account (or into the
Master Lease Deposit Account, with respect to Master Lease Deposits) not less than
one time during each calendar month all security deposits in the form of Money
received from the tenants, since the date of the previous deposit (or in the
case of the initial deposit, since the Closing Date),


 


(B)           deposit
or cause the Manager to deposit in the Collection Account or Local Collection
Account, all Rents and Money received from Accounts or under Leases and derived
from the Mortgaged Property and all Proceeds thereof, in each case on each
Business Day following the collection and receipt thereof during the first
seven (7) Business Days of each calendar month and not less than once during
each calendar week of such month commencing after such seventh (7th)
day, and


 


(C)           sweep
or cause to be swept by each Local Collection Account Bank all Money on deposit
in the Local Collection Account in excess of $10,000 (which the Local
Collection Account Bank shall be entitled to use to offset any returned items)
to the Collection Account on each Business Day.


 


Borrower shall not have any right to withdraw Money from the Local
Collection Account, the Security Deposit Account, the Master Lease Deposit
Account or the Collection Account, which shall be under the sole dominion and
control, and the “control” within the meaning of Sections 9-104 and 9-106 of the
UCC, of Lender; provided, that notwithstanding the foregoing, so long as
an Event of Default has not occurred and is not continuing (or if an Event of
Default has occurred and is continuing but Borrower is required to return the
security deposit in accordance with applicable Legal Requirements), Borrower
may instruct the Local Collection Account Bank to withdraw from the Security
Deposit Account security deposits (other than Master Lease Deposits) in order
to satisfy Borrower’s obligations to return the same to tenants entitled to
them under and in accordance with the Leases. 
Any disbursement of Master Lease Deposits shall in each case be subject
to Lender’s prior approval and direction, provided


 


38

















 


that Lender shall authorize, upon Borrower’s request made not more
frequently than on a monthly basis, disbursements reflecting any reduction in
Master Lease Deposits to which the tenant under the applicable Master Homesite
Lease Documentation is entitled.  In the
event of a Lease default or other occurrence whereby Borrower, as landlord,
shall become entitled to retain any security deposits or apply the same to
amounts owed under the applicable Lease, any such security deposits so retained
and/or applied by Borrower shall, upon such retention or application, be
transferred from the Security Deposit Account to the Local Collection Account
or the Collection Account and treated in the same manner as Rents; provided,
that in the event of a default under the Master Homesite Lease Documentation
entitling the landlord to retain Master Lease Deposits, the Master Lease
Deposits shall not be transferred to the Collection Account and treated as
Rents but instead shall continue to be held in the Master Lease Deposit Account
as additional collateral for the Indebtedness. 
Any such Rents, Money or Proceeds held by Borrower or the Manager prior
to deposit into the Local Collection Account shall be held in trust for the
benefit of Lender.  Borrower shall be
responsible for the payment of all costs and expenses in connection with
establishing and maintaining the Collection Account, the Local Collection
Account, the Security Deposit Account, the Master Lease Deposit Account and the
Reserve Accounts (including, without limitation, Collection Account Bank’s and
Local Collection Account Bank’s fees and charges) and shall reimburse Lender
upon demand for any such costs or expenses incurred by Lender.


 


(ii)           In
the event that any Event of Default has occurred and is continuing,


 


(A)          upon
request of Lender, Borrower shall deliver to each tenant under a Lease an
irrevocable direction letter in a form approved by Lender requiring the tenant
to pay all Rents and other Money under Leases, and any Money received from
Accounts or otherwise derived from the Mortgaged Property and Proceeds thereof
owed to Borrower directly to the Collection Account or (if Lender elects) a
Local Collection Account and shall deliver an irrevocable direction letter in
such form to each tenant under a new Lease entered into thereafter prior to the
commencement of such Lease,


 


(B)           upon
request of Lender, all Rents and Money received from Accounts or under Leases
and derived from the Mortgaged Property and all Proceeds thereof shall be
payable to Lender or as otherwise directed by Lender,


 


(C)           if
a tenant under a Lease forwards any Rents, Money or Proceeds to Borrower or
Manager rather than directly to the Collection Account or applicable Local
Collection Account, Borrower shall (i) if the Lender has made the request
referred to in Section 2,12(a)(ii)(A) above, deliver an additional irrevocable
direction letter to the tenant and make other commercially reasonable efforts
to cause the tenant to thereafter forward such Rents, Money or Proceeds
directly to the Collection Account or (if Lender elects) a Local Collection
Account, and (ii) immediately deposit or cause the Manager to deposit in the
Collection Account any such Rents, Money or Proceeds received by Borrower or
Manager,


 


39

















 


(D)          Borrower
shall not have any right to make or direct any withdrawals from the Collection
Account or the Reserve Account without the prior written consent of Lender (it
being understood and agreed that Borrower may continue to make withdrawals from
the Security Deposit Account as described above), and


 


(E)           any
and all funds on deposit in the Collection Account and the Reserve Accounts may
be allocated by Lender in its sole discretion for the payment of the
Indebtedness pursuant to Section 2.8 of this Agreement or to the
Operating Expense Account, the Working Capital Reserve Account or the Debt
Service Reserve Account.


 


(iii)          Borrower
shall deposit in the Collection Account all Loss Proceeds received by Borrower.


 


(b)           Distribution of
Cash.  So long as an Event of
Default has not occurred and is not continuing (and thereafter at Lender’s sole
option and discretion), Lender shall apply funds on deposit in the Collection
Account (to the extent not held in Reserve Accounts constituting sub-accounts
of the Collection Account, if any, and with the exception of Loss Proceeds,
which shall be applied as provided in Section 2.12(e) and Section
5.1(x) of this Agreement) on each Payment Date as follows:


 


(i)            first,
to the Real Estate Taxes Escrow Account and the Insurance Escrow Account, in
that order, in the respective amounts required to be deposited therein as
described in Section 2.13(b);


 


(ii)           second, to
the payment to Lender of any expenses then due and payable to Lender or its
servicer(s) pursuant to this Agreement or the other Loan Documents;


 


(iii)          third, to
the payment to Lender of the Monthly Debt Service Payment due upon such Payment
Date;


 


(iv)          fourth, to
the Replacement Reserve Account in the amount required to be deposited therein
as described in Section 2.13(a);


 


(v)           fifth, to the
payment of any outstanding indemnification payment to which an Indemnified
Party is then entitled pursuant to Sections 5.1(i) and 5.1(j),
and any other amounts then due and payable to Lender pursuant to this Agreement
and the other Loan Documents which are not paid from applications under clause
(iii) above;


 


(vi)          sixth, to the
Prepaid Rent Account in the amount required to be deposited therein as
described in Section 2.13(d);


 


(vii)         seventh, if
no Event of Default exists, to Borrower in an amount equal to remaining
available funds, if any; provided, that if any Event of Default exists,
no disbursement shall be made under this clause seventh; and


 


40

















 


(viii)        eighth, if
any Event of Default exists, then to the extent Lender has not made other
application of such remaining available funds in Lender’s discretion as
provided hereunder, all remaining available funds shall be allocated as
determined by Lender in Lender’s sole and absolute discretion (and re-allocated
from time to time as Lender may elect) and retained in the Debt Service Reserve
Account, the Working Capital Reserve Account and/or the Operating Expense
Account or, at Lender’s option, in other Lender-controlled accounts.


 


(c)           Permitted
Investments.  So long as no Event of
Default has occurred and is continuing, Borrower shall direct Lender in writing
to invest and reinvest any balance in the Collection Account, from time to time
in Permitted Investments (subject to the availability of such Permitted
Investments with the Collection Account Bank); provided, however,
that


 


(i)            the
maturity of the Permitted Investments on deposit therein shall be at the
discretion of Borrower, but in any event no later than the Business Day
immediately preceding the date on which such funds are required to be withdrawn
therefrom pursuant to Section 2.12(a) or 2.12(b) of this
Agreement,


 


(ii)           after an Event of
Default has occurred and for so long as such Event of Default is continuing
Borrower shall not have any right to direct investment of the balance in the
Collection Account,


 


(iii)          all such Permitted
Investments shall be held in the name of Lender or its servicer and shall be
credited to the Collection Account, and


 


(iv)          if no written
investment direction is provided to Lender by Borrower, Lender may at Lender’s
option invest any balance in the Collection Account in such Permitted
Investments as may be selected by Lender.


 


Lender shall have no liability for any loss in investments of funds in
the Collection Account that are invested in Permitted Investments and no such
loss shall affect Borrower’s obligation to fund, or liability for funding, the
Collection Account.  All interest paid
or other earnings on funds deposited into the Collection Account made hereunder
shall be deposited into the Collection Account.  Borrower shall include all earnings on the Collection Account as
income of Borrower for federal and applicable state tax purposes.


 


(d)           Intentionally
Omitted.


 


(e)           Loss Proceeds.  In the event of a casualty or Taking with
respect to the Mortgaged Property, all of Borrower’s interest in Loss Proceeds
shall be paid directly to the Collection Account.  Subject to the provisions of Section 5.1(x) of this
Agreement, whereby Loss Proceeds may in certain cases and upon satisfaction of
the terms and conditions set forth in Section 5.1(x) be made available
for Restoration, Loss Proceeds may, at Lender’s option exercised in Lender’s
sole discretion, be applied to the Indebtedness and, upon payment in full of
the Indebtedness or, if an Event of Default exists, in any manner determined by
Lender in Lender’s sole discretion in accordance with Section 2.8
hereof.  If the Loss Proceeds are to be
made available for Restoration pursuant to Section 5.1(x) of this Agreement,
such Loss Proceeds shall be held by Lender in a segregated interest-bearing
Eligible Account in the name of Lender


 


41

















 


and under the sole dominion and control of
Lender to be opened (if not previously opened and maintained by the Collection
Account Bank under the Collection Account Agreement by the Lender) by Lender at
a financial institution selected by Lender (the “Loss Proceeds Account”).  Funds on deposit in the Loss Proceeds
Account shall be invested in Permitted Investments (subject to the availability
of such Permitted Investments with the Collection Account Bank) in the same
manner and subject to the same restrictions as set forth in Section 2.12(c)
with respect to the Collection Account (except that the maturity shall be not
later than as necessary to satisfy any schedule of distributions for
Restoration required or approved by Lender). 
If any Loss Proceeds are received by Borrower, such Loss Proceeds shall
be received in trust for Lender, shall be segregated from other funds of
Borrower, and shall be forthwith paid to Lender to the extent necessary to
comply with this Agreement.


 


Section 2.13.          Reserve
Accounts.


 


(a)           Deferred
Maintenance Escrow Account and Replacement Reserve Account.


 


(i)            On
or before the Closing Date, Lender shall establish on behalf of Borrower and
maintain with the Collection Account Bank two separate accounts for deferred
maintenance and replacement reserves, each of which shall be an Eligible
Account and shall have the same title as the Collection Account, for the
benefit of Lender until the Loan is paid in full.  The two accounts shall be designated the “Deferred Maintenance
Escrow Account” (the “Deferred Maintenance Escrow Account”) and the
“Replacement Reserve Account” (the “Replacement Reserve Account”).  On the Closing Date, Lender shall deposit
out of the Loan proceeds $235,795.00 in the Deferred Maintenance Escrow Account
and $7,558.33 in the Replacement Reserve Account.  On each Payment Date, commencing with the April 2004 Payment
Date, Borrower shall deposit from the Collection Account (or if the funds for
such deposit are not available pursuant to Section 2.12(b), shall make
an additional deposit of Borrower’s funds sourced from equity capital
contributions) to the Replacement Reserve Account, of an amount equal to the
Replacement Reserve Deposit Amount until the amount on deposit in the
Replacement Reserve Account equals the Replacement Reserve Threshold Amount for
the initial time.  During the period
commencing on the April 2004 Payment Date when such deposits are being made to
the Replacement Reserve Account until the funds on deposit therein equal the
Replacement Reserve Threshold Amount for the initial time, no withdrawals may
be made from the Replacement Reserve Account. 
After the amount on deposit in the Replacement Reserve Account equals
the Replacement Reserve Threshold Amount for the initial time, the Borrower may
request withdrawals from the Replacement Reserve Account pursuant to the
procedure set forth in Section 2.13(a)(iii) below.  In the event following such withdrawal, the
amount on deposit in the Replacement Reserve Account shall be less than the
Replacement Reserve Threshold Amount then on each subsequent Payment Date
Borrower shall deposit from the Collection Account (or if the funds for such
deposit are not available pursuant to Section 2.12(b), shall make an
additional deposit of Borrower’s funds sourced from equity capital
contributions) to the Replacement Reserve Account, of an amount equal to the
Replacement Reserve Deposit Amount until the amount on the deposit in the
Replacement Reserve Account once again


 


42

















 


equals the Replacement Reserve Threshold Amount (following which event
the Borrower shall once again not be obligated to make deposits to the
Replacement Reserve Account).


 


(ii)           Any and all Moneys
remitted to the Deferred Maintenance Escrow Account, together with any
interest, earnings or income earned thereon, shall be held in the Deferred
Maintenance Escrow Account to be withdrawn by Lender upon written request of
Borrower made not more than once each month in an amount not less than $10,000,
and applied to pay directly or reimburse Borrower for repairs set forth on Schedule
1 attached hereto (the “Immediate Repairs”) upon satisfaction of the
disbursement conditions listed on Schedule 6 hereof.  Within the applicable time period(s) for
completion set forth on Schedule 1, Borrower shall complete such
Immediate Repairs and shall provide to Lender such documentation, and other
evidence of compliance with law as Lender may reasonably require. The funds
contained in the Deferred Maintenance Escrow Account shall be utilized by
Borrower solely for performance of the Immediate Repairs in accordance with the
Property Condition Assessments and Environmental Reports, and shall not be used
by Borrower for purposes for which any other Reserve Account is established.
Upon written application of Borrower (which may be done by electronic mail or
e-mail), Borrower shall be entitled to obtain disbursements by Lender from the
Deferred Maintenance Escrow Account to pay costs incurred by Borrower for such
Immediate Repairs, provided that (a) no Event of Default has occurred and is
continuing, (b) Borrower shall provide to Lender (including electronic mail or
e-mail) such documentation and certifications as Lender may reasonably request
to substantiate the requirement for and entitlement to such disbursement, (c)
Borrower shall provide to Lender (including by electronic mail or e-mail) with
all invoices, receipts, lien waivers and other documentation of lawful and
workmanlike progress or completion, lien-free status, and availability of
sufficient funds, all as may be reasonably requested by Lender, and (d) Borrower
shall provide Lender such evidence as may be reasonably satisfactory to Lender
that after payment of any draw for Immediate Repairs, the funds remaining in
the Deferred Maintenance Escrow Account shall be sufficient to pay for the
remainder of such Immediate Repairs.  
In the event Borrower completes the repairs for which funds were
reserved in the Deferred Maintenance Escrow Account to the reasonable
satisfaction of Lender, Lender shall disburse any and all amounts then on
deposit in the Deferred Maintenance Escrow Account to the Collection Account.


 


(iii)          Subject to the
provisions of Section 2.13(a)(i), any and all Moneys remitted to the
Replacement Reserve Account, together with any interest, earnings or income
thereon, shall be held in the Replacement Reserve Account to be withdrawn by
Lender upon written request of Borrower made not more than once each month in
an amount not less than $10,000, and applied to reimburse Borrower for Capital
Improvement Costs (other than those for Immediate Repairs) reasonably approved
by Lender for disbursements from the Replacement Reserve (“Approved Capital
Expenditures”) upon satisfaction of the disbursement conditions listed on Schedule
6 hereof, provided that funds in the Replacement Reserve Account shall not
be used by Borrower for purposes for which any other Reserve Account is
established.


 


43

















 


(b)           Real Estate Taxes
Escrow Account and Insurance Escrow Account.  On or before the Closing Date, Lender shall on behalf of the
Borrower establish and maintain with the Collection Account Bank two separate
accounts for Basic Carrying Costs, each of which shall be an Eligible Account
and shall have the same title as the Collection Account for the benefit of
Lender until the Loan is paid in full. 
The two accounts shall be designated the “Real Estate Taxes Escrow
Account” (the “Real Estate Taxes Escrow Account”) and the “Insurance
Escrow Account” (the “Insurance Escrow Account”).  On the Closing Date, the Lender shall
deposit out of the Loan proceeds $129,173.43 in the Real Estate Taxes Escrow
Account and $21,772.47 in the Insurance Escrow Account (i.e. the amount
necessary to meet the first bill with credit for existing monthly escrow
payments made prior to the applicable due date).  With respect to each Payment Date, Borrower shall deposit from
the Collection Account (or, if the funds for such deposit are not available
pursuant to Section 2.12(b), shall make an additional deposit of
Borrower’s funds sourced from equity capital contributions),


 


(1)           an
amount equal to (1/12th) one-twelfth of the annual real estate taxes
and any other Impositions that if not paid in a timely manner will result in a
Lien on a Mortgaged Property in the Real Estate Taxes Escrow Account,


 


(2)           an
amount equal to one-twelfth (1/12th) of the annual insurance
premiums for policies of insurance required to be maintained by Borrower with
respect to the Mortgaged Property pursuant to this Agreement, and any
additional insurance required under any of the other Loan Documents, in the
Insurance Escrow Account.


 


Any and all Moneys remitted to the Real Estate Taxes Escrow Account or
Insurance Escrow Account (which shall not bear interest for the benefit of
Borrower) shall be held in the Real Estate Taxes Escrow Account or Insurance
Escrow Account to be withdrawn from the Real Estate Taxes Escrow Account or
Insurance Escrow Account, as applicable, by Lender or its servicer upon written
request of Borrower delivered to Lender and its servicer together with
documentation and other evidence (including invoices and in the case of a
reimbursement of Borrower, evidence that the related costs have been paid) with
respect to the respective Basic Carrying Costs towards which such funds are to
be applied, and applied to pay directly (or reimburse Borrower, in the case of
insurance premiums only) for (x) any Impositions (in the case of the Real
Estate Taxes Escrow Account) or (y) any insurance premiums for policies of
insurance required to be maintained by Borrower with respect to the Mortgaged
Property pursuant to this Agreement, and any additional insurance required
under any of the other Loan Documents (in the case of the Insurance Escrow
Account).  Borrower shall provide Lender
or its servicer with bills and other documents necessary for payment of
Impositions and insurance premiums at least ten (10) Business Days prior to the
due dates therefor.  In the event the
amount on deposit in the Real Estate Taxes Escrow Account or the Insurance Escrow
Account exceeds the amount due for Impositions by more than one-twelfth (1/12th)
of the annual real estate taxes (in the case of the Real Estate Taxes Escrow
Account) or the amount due for insurance premiums (in the case of the Insurance
Escrow Account), respectively, Lender or its servicer shall in its sole
discretion credit such excess against future payment obligations to the Real
Estate Taxes Escrow Account or the Insurance Escrow Account, as applicable.


 


(c)           Operating Expense
Account, Working Capital Reserve Account and the Debt Service Reserve Account.  On or before the Closing Date, Lender shall
on behalf of the


 


44

















 


Borrower establish and maintain with the
Collection Account Bank three accounts for the remittance of funds by Lender or
its servicer in its sole discretion after an Event of Default has occurred and
is continuing, each of which shall be an Eligible Account and shall have the
same title as the Collection Account for the benefit of Lender until the Loan
is paid in full.  The three accounts
shall be designated the “Operating Expense Account” (the “Operating Expense
Account”), the “Working Capital Reserve Account” (the “Working Capital
Reserve Account”) and the “Debt Service Reserve Account” (the “Debt
Service Reserve Account”).  On any
Business Day after the occurrence and during the continuance of an Event of
Default, Lender or its servicer may in its sole discretion deposit into the
Operating Expense Account, the Working Capital Reserve Account or the Debt
Service Reserve Account any funds then on deposit in the Local Collection
Account or the Collection Account.  Any
and all Moneys remitted to the Operating Expense Account, the Working Capital
Reserve Account or the Debt Service Reserve Account shall, until otherwise
applied by Lender from time to time at Lender’s sole discretion during the
existence of any Event of Default, be held in the Operating Expense Account,
the Working Capital Reserve Account or the Debt Service Reserve Account, as
applicable, and applied, if Lender elects in its sole discretion to make such
funds available for such application,


 


(x)            with
respect to the Operating Expense Account only, to pay Property Expenses
provided for in the Operating Budget approved by Lender, or for other Property
Expenses approved by Lender,


 


(y)           with
respect to the Working Capital Reserve Account only, as a working capital
reserve up to the then applicable Working Capital Reserve Amount, as the same
adjusts from time to time under the then applicable Working Capital Budget, or
in such greater or lesser amount as Lender may determine from time to time,
with disbursements from time to time at Lender’s option from the Working
Capital Reserve Account to the Operating Expense Account as working capital
needs arise which may not be satisfied from the funds on hand in the Operating
Expense Account, all at the sole election of Lender, and


 


(z)            with
respect to the Debt Service Reserve Account only, applied to pay the
Indebtedness at the sole election of Lender;


 


provided, that (1) notwithstanding the
foregoing, Lender may at any time, in its sole discretion, elect to apply the
funds on deposit in the Operating Expense Account and/or the Working Capital
Reserve Account to pay the Indebtedness (including without limitation any
Prepayment Consideration and other amounts due Lender in connection with such
prepayment) while any Event of Default exists, and (2) in the event Lender
accepts in writing a proposed cure of the Event of Default which precipitated
the deposits to the Operating Expense Account, the Working Capital Reserve
Account and the Debt Service Reserve Account and no other Event of Default
exists, then the funds on deposit in the Operating Expense Account, the Working
Capital Reserve Account and the Debt Service Reserve Account shall be released
to Borrower.


 


(d)           Prepaid Rent
Account.  On or before the Closing
Date, Lender shall on behalf of the Borrower establish and maintain with the
Collection Account Bank an account for the remittance of prepaid Rent
designated the Prepaid Rent Account (the “Prepaid Rent Account”) which shall be
an Eligible Account and shall have the same title as Collection


 


45

















 


Account for the benefit of the Lenders until
the Loan is paid in full.  On the
Closing Date, the initial Lender shall deposit out of the Loan proceeds $0.00
in the Prepaid Rent Account, which shall be an estimate of prepaid Rent held by
Borrower.  At least five (5) Business
Days prior to the First Payment Date, Borrower will provide to Lender a certified
prepaid rent roll in the form attached as Schedule 9 showing the amount
of prepaid Rent held by Borrower, and the amount of the prepaid Rent deposited
in the Prepaid Rent Account shall be adjusted accordingly on the First Payment
Date, by a transfer of funds between the Collection Account and the Prepaid
Rent Account.  On any Payment Date as of
which the most recent Monthly Statement indicates that the prepaid Rent exceeds
$15,000, Lender shall deposit or cause to be deposited in the Prepaid Rent Account
pursuant to clause sixth of Section 2.12(b) an amount equal to the positive
difference, if any, between the amount indicated in the Monthly Statement and
the amount then on deposit in the Prepaid Rent Account.  On any Payment Date as of which the most
recent Monthly Statement indicates that the prepaid Rent exceeds $15,000 but is
less than the amount then on deposit in the Prepaid Rent Account, the Lender
shall withdraw from the Prepaid Rent Account and transfer to the Collection
Account the positive difference between the amount on deposit in the Prepaid
Rent Account and such amount contained in the most recent Monthly Statement to
be applied together with the other collections from the Mortgaged Properties
pursuant to Section 2.12(b) on such Payment Date.  On any Payment Date as of which the most recent Monthly Statement
indicates that the prepaid Rent which was previously in excess of $15,000 has
been reduced below $15,000, the Lender shall withdraw from the Prepaid Rent
Account and transfer to the Collection Account the entire amount of funds then
on deposit in the Prepaid Rent Account to be applied together with the other
collections from the Mortgaged Properties pursuant to Section 2.12(b) on such
Payment Date.  In the event of and after
a release of a Mortgaged Property, all of the references above in this
paragraph to $15,000 shall be adjusted to equal one-twelfth (1/12th) of the
product of 7.70% and the Underwritten Net Cash Flow of all of the remaining
Mortgaged Properties.


 


(e)           Investment of Funds.  All or a portion of any Moneys in the
Reserve Accounts (other than the Real Estate Tax Escrow Account, the Insurance
Escrow Account, the Operating Expense Account, the Working Capital Reserve
Account and the Debt Service Reserve Account, none of which shall bear interest
for the benefit of Borrower) shall, so long as no Event of Default has occurred
and is continuing, be invested and reinvested by Lender in accordance with
written instructions delivered by Borrower, or after an Event of Default has occurred
and is continuing, by Lender, in one or more Permitted Investments (subject to
the availability of such Permitted Investments with the Collection Account
Bank).  If no written investment
direction is provided to Lender by Borrower, Lender may at its option invest
such Moneys in a Permitted Investment selected by Lender.  All interest paid or other earnings on funds
deposited into the Reserve Accounts made hereunder shall be deposited into the
Reserve Accounts (other than with respect to the Real Estate Taxes Escrow
Account and the Insurance Escrow Account for which Lender and its servicer
shall not have any obligation to deposit such interest or earnings into such
accounts).  Lender shall have no
liability for any loss in investments of funds in any Reserve Account that are
invested in Permitted Investments and no such loss shall affect Borrower’s
obligation to fund, or liability for funding, the Reserve Accounts.  Unless and until title to the funds therein
shall have vested in any Person other than Borrower, Borrower shall include all
such income or gain on any account of the Reserve Account as income of Borrower
for federal and applicable state tax purposes.


 


46

















 


(f)            Event of Default.  After an Event of Default has occurred and
is continuing, Borrower shall not be permitted to make any withdrawal(s) from
any Pledged Accounts and Lender may liquidate any Permitted Investments of the
amount on deposit in such account, withdraw and use such amount on deposit in
the Pledged Accounts to make payments on account of the Indebtedness or
otherwise as provided in Section 2.8. 
Without in any way limiting the foregoing or Lender’s rights and
remedies upon an Event of Default, and subject to Lender’s direction otherwise
from time to time, in whole or in part, in Lender’s sole and absolute
discretion, after and during the continuance of an Event of Default Lender may
direct the Collection Account Bank or the Local Collection Account Bank to
disburse to Lender or allocate all available funds on deposit in the Pledged
Accounts to: (a) any debt service or other Indebtedness due under this Loan
Agreement or the other Loan Documents; (b) any Reserve Account established
under this Loan Agreement; (c) otherwise as a reserve for Property Expenses,
Capital Improvement Costs, Impositions and other expenditures relating to the
use, management, operation or leasing of the Mortgaged Property; and/or (d) any
costs and expenses incurred by Lender in connection with such Event of Default,
or expended by Lender to protect or preserve the value of the Mortgaged
Property.


 


Section 2.14.          Additional
Provisions Relating to the Pledged Accounts.


 


(a)           Borrower covenants
and agrees that:  (i) all securities or
other property underlying any financial assets credited to any Pledged Account
shall be registered in the name of Lender, indorsed to Lender or indorsed in
blank or credited to another securities account maintained in the name of
Lender and in no case will any financial asset credited to any Pledged Account
be registered in the name of Borrower, payable to the order of Borrower or
specially indorsed to Borrower except to the extent the foregoing have been
specially indorsed to Lender or in blank; and (ii) all Permitted Investments
and all other property delivered to Lender pursuant to this Agreement will be
promptly credited to one of the Pledged Accounts.


 


(b)           Borrower hereby
agrees that each item of property (whether investment property, financial
asset, security, instrument, cash or otherwise) credited to any Pledged Account
shall be treated as a “financial asset” 
within the meaning of Section 8-102(a)(9) of the UCC.


 


(c)           Borrower
acknowledges and agrees that the Collection Account Bank and Local Collection
Account Bank shall comply with all “entitlement orders” (i.e. an order
directing transfer or redemption of any financial asset relating to a Pledged
Account, and any “entitlement order” as defined in Section 8-102(a)(8) of the
UCC) and instructions (including any “instruction” within the meaning of
Section 9-104 of the UCC) originated by Lender without further action or
consent by Borrower, Manager or any other Person.


 


(d)           Regardless of any
provision in any other agreement, for purposes of the UCC, with respect to each
Pledged Account, New York shall be deemed to be the bank’s jurisdiction (within
the meaning of Section 9-304 of the UCC) and the securities intermediary’s
jurisdiction (within the meaning of Section 8-110 of the UCC). The Pledged
Accounts shall be governed by the laws of the State of New York.


 


47

















 


(e)           Except for the
claims and interest of Lender and of Borrower in the Pledged Accounts, Borrower
represents and warrants that it does not know of any Lien on or claim to, or
interest in, any Pledged Account or in any “financial asset” (as defined in
Section 8-102(a) of the UCC) credited thereto. 
If any Person asserts any Lien, encumbrance or adverse claim (including
any writ, garnishment, judgment, warrant of attachment, execution or similar
process) against the Pledged Accounts or in any financial asset carried
therein, Borrower will promptly notify Lender thereof and shall indemnify,
defend and hold Lender and each of the Indemnified Parties harmless from and
against any such Lien, encumbrance or claim.


 


Section 2.15.          Security
Agreement.


 


(a)           Pledge of Pledged
Accounts.  To secure the full and
punctual payment and performance of all of the Indebtedness, Borrower hereby
assigns, conveys, pledges and transfers to Lender, as secured party, and grants
Lender a first and continuing security interest in and to, the following
property, whether now owned or existing or hereafter acquired or arising and
regardless of where located (collectively, the “Account Collateral”):


 


(i)            all
of Borrower’s right, title and interest in the Pledged Accounts and all Money
and Permitted Investments, if any, from time to time deposited or held in the
Pledged Accounts or purchased with funds or assets on deposit in the Pledged
Accounts;


 


(ii)           all of Borrower’s
right, title and interest in interest, dividends, Money, Instruments and other
property from time to time received, receivable or otherwise payable in respect
of, or in exchange for, any of the foregoing until such time as such items are
disbursed from the Pledged Accounts; and


 


(iii)          to the extent not
covered by clause (i) or (ii) above, all Proceeds of any or all
of the foregoing until such time as such items are disbursed from the Pledged
Accounts.


 


Lender and Collection Account Bank and Local Collection Account Bank,
each as agent for Lender, shall have with respect to the foregoing collateral,
in addition to the rights and remedies herein set forth, all of the rights and
remedies available to a secured party under the UCC, as if such rights and remedies
were fully set forth herein.


 


(b)           Covenants; Sole
Dominion and Control.  So long as
any portion of the Indebtedness is outstanding, Borrower shall not open any
account other than the Local Collection Account for the deposit of Rents or
Money received from Accounts or under Leases and derived from the Mortgaged
Property and all Proceeds to pay amounts owing hereunder, other than any
account for amounts required by law to be segregated by Borrower.  Borrower shall not have any right to
withdraw Money from the Pledged Accounts. 
Borrower acknowledges and agrees that the Pledged Accounts are and shall
at all times continue to be subject to and under the sole dominion and control,
and the “control” within the meaning of Sections 9-104 and 9-106 of the UCC, of
Lender.  Notwithstanding anything set
forth herein to the contrary, neither Borrower nor Manager nor any other person
or entity, through or under Borrower, shall have any control over the use of,
or any right to withdraw any amount from, any Pledged Accounts, and Borrower
acknowledges that the Collection Account Bank and the Local Collection Account
Bank shall


 


48

















 


comply with all instructions originated by
Lender without further consent by Borrower. 
Borrower acknowledges and agrees that the Collection Account Bank and
Local Collection Account Bank shall comply with the instructions of Lender with
respect to the Pledged Accounts without the further consent of Borrower or
Manager.  The Account Collateral shall
be subject to such applicable laws, and such applicable regulations of the
Board of Governors of the Federal Reserve System and of any other banking
authority or Governmental Authority, as may now or hereafter be in effect, and
to the rules, regulations and procedures of the financial institution where the
Account Collateral is maintained relating to demand deposit accounts generally
from time to time in effect.


 


(c)           Financing
Statements; Further Assurances. 
Borrower hereby irrevocably authorizes Lender at any time and from time
to time to file any financing statements or continuation statements, and
amendments to financing statements, in any jurisdictions and with any filing
offices as Lender may determine, in its sole discretion, are necessary or advisable
to perfect the security interests granted to Lender in connection
herewith.  Such financing statements may
describe the collateral in the same manner as described in any security
agreement or pledge agreement entered into by the parties in connection herewith
or may contain an indication or description of collateral that describes such
property in any other manner as Lender may determine, in its sole discretion,
is necessary, advisable or prudent to ensure the perfection of the security
interest in the collateral granted to Lender in connection herewith, including,
without limitation, describing such property as “all assets” or “all personal
property” of Borrower whether now owned or hereafter acquired.  From time to time, at the expense of
Borrower, Borrower shall promptly execute and deliver all further instruments,
and take all further action, that Lender may reasonably request, in order to
continue the perfection and protection of the pledge and security interest
granted or purported to be granted hereby.


 


(d)           Transfers and
Other Liens.  Borrower shall not
sell or otherwise dispose of any of the Account Collateral other than pursuant
to the terms of this Agreement and the other Loan Documents, or create or
permit to exist any Lien upon or with respect to all or any of the Account
Collateral, except for the Lien granted to Lender under or as contemplated by
this Agreement.


 


(e)           No Waiver.  Every right and remedy granted to Lender
under this Agreement or by law may be exercised by Lender at any time and from
time to time, and as often as Lender may deem it expedient.  Any and all of Lender’s rights with respect
to the pledge of and security interest in the Account Collateral granted
hereunder shall continue unimpaired, and to the extent permitted by law, Borrower
shall be and remain obligated in accordance with the terms hereof,
notwithstanding (i) any proceeding of Borrower under the United States
Bankruptcy Code or any bankruptcy, insolvency or reorganization laws or
statutes of any state, (ii) the release or substitution of Account Collateral
at any time, or of any rights or interests therein or (iii) any delay,
extension of time, renewal, compromise or other indulgence granted by Lender in
the event of any Default with respect to the Account Collateral or otherwise
hereunder.  No delay or extension of
time by Lender in exercising any power of sale, option or other right or remedy
hereunder, and no notice or demand which may be given to or made upon Borrower
by Lender, shall constitute a waiver thereof, or limit, impair or prejudice
Lender’s right, without notice or demand, to take any action against Borrower
or to exercise any other power of sale, option or any other right or remedy.


 


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(f)            Lender Appointed
Attorney-In-Fact.  Borrower hereby
irrevocably constitutes and appoints Lender as Borrower’s true and lawful
attorney-in-fact, with full power of substitution, at any time after the
occurrence and during the continuation of an Event of Default, to execute,
acknowledge and deliver any instruments and to exercise and enforce every
right, power, remedy, option and privilege of Borrower with respect to the
Account Collateral, and do in the name, place and stead of Borrower, all such
acts, things and deeds for and on behalf of and in the name of Borrower with
respect to the Account Collateral, which Borrower could or might do or which
Lender may deem necessary or desirable to more fully vest in Lender the rights
and remedies provided for herein with respect to the Account Collateral and to
accomplish the purposes of this Agreement. 
The foregoing powers of attorney are irrevocable and coupled with an
interest and shall terminate upon repayment of the Indebtedness in full.


 


(g)           Continuing
Security Interest; Termination. 
This Section 2.15 shall create a continuing pledge of and
security interest in the Account Collateral and shall remain in full force and
effect until payment in full by Borrower of the Indebtedness.  Upon payment in full by Borrower of the
Indebtedness, Lender shall return to Borrower such of the Account Collateral as
shall not have been applied pursuant to the terms hereof, and shall execute
such instruments and documents as may be reasonably requested by Borrower to
evidence such termination and the release of the pledge and lien hereof.


 


Section 2.16.          Mortgage
Recording Taxes.  The Lien to be
created by the Mortgages is intended to encumber the Mortgaged Property to the
full extent of the Loan Amount; provided, that, notwithstanding the
foregoing, with respect to any Mortgaged Property located in a state that
imposes mortgage recording taxes where the imposition of a lower amount would
allow tax savings to the Borrower, the Lien to be created by the related
Mortgage is intended to encumber the Mortgaged Property in an amount acceptable
to the Lender which amount shall in no event be less than 125% of the value of
the Mortgaged Property as determined by the Lender Appraisals.  On the Closing Date, Borrower shall have
paid all state, county and municipal recording and all other taxes imposed upon
the execution and recordation of the Mortgages, if any.


 


Section 2.17.          Partial
Release.  After the First Open
Defeasance Date and prior to the First Open Payment Date, and provided no Event
of Default exists, Borrower may from time to time obtain a partial release (a “Partial
Release”) from the lien of the Mortgage and the Loan Documents of up to two
of the individual Mortgaged Properties listed on Schedule 2.17 hereto
(each such individual Mortgaged Property to be released, a “Partial Release
Property”), provided that all of the following conditions precedent have
been satisfied with respect to any such Partial Release of any such Partial
Release Property:


 


(a)           No Partial Release
of a Partial Release Property will be permitted until after the First Open
Defeasance Date or if any Event of Default has occurred and is continuing. No
Partial Release of the Partial Release Property will be permitted on or after
the First Open Payment Date.  No more
than two Partial Release Properties may be released during the term of the
Loan.


 


(b)           No Partial Release
of the Partial Release Parcel will be permitted unless Borrower establishes to
Lender’s satisfaction that the Debt Service Coverage Ratio for the


 


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remainder of the Mortgaged Property (i.e.,
exclusive of any income from the Partial Release Property) is and shall
continue to be equal to or greater than the greater of (i) the Debt Service
Coverage Ratio for the Mortgaged Property calculated immediately prior to the
Partial Release (i.e., inclusive of the income from the Partial Release
Property), and (ii) 1.30:1.00.  If the
foregoing condition would not be satisfied by defeasance of the Partial
Defeasance Amount indicated in subparagraph (e) below, Borrower may by written
notice to Lender given not less than ten (10) days prior to the Partial
Defeasance increase the Partial Defeasance Amount to an amount which would
result in the foregoing condition being satisfied upon completion of the
Partial Defeasance of such larger Partial Defeasance Amount.  No Partial Defeasance, nor any increase in
any Partial Defeasance Amount under this paragraph (b) or paragraphs (c) below,
shall affect the allocated loan amounts for the remaining Mortgaged Property as
set forth on Schedule 2.17.


 


(c)           No Partial Release
of the Partial Release Parcel will be permitted unless Borrower establishes to
Lender’s satisfaction that the value of the remainder of the Mortgaged Property
(as determined by then-current Appraisals prepared by Appraisers approved by
Lender, the fees and expenses of which shall be paid by Borrower) is sufficient
to satisfy a loan-to-value ratio (based on the outstanding principal balance of
the Loan immediately prior to the Partial Release, less the allocated loan
amount for the Partial Release Property) which is the lesser of (i) 75% and
(ii) the loan-to-value ratio for the Mortgaged Property (inclusive of the
Partial Release Property, and based on the outstanding principal balance of the
Loan immediately prior to the Partial Release) calculated immediately prior to
the Partial Release.  If the foregoing
condition would not be satisfied by defeasance of the Partial Defeasance Amount
indicated in subparagraph (e) below, Borrower may by written notice to Lender
given not less than ten (10) days prior to the Partial Defeasance increase the
Partial Defeasance Amount to an amount which would result in the foregoing
condition being satisfied upon completion of the Partial Defeasance of such
larger Partial Defeasance Amount.


 


(d)           The Partial Release
shall be allowed only in connection with a bona fide all-cash sale of the
Partial Release Parcel to an unaffiliated third party on arms-length terms and
conditions, and upon closing of such sale (and thereafter) shall not be owned,
purchased or acquired by Borrower or any Affiliate of Borrower.


 


(e)           Borrower will on the
date of the Partial Release (the “Partial Release Date”) complete a
Partial Defeasance, pursuant to Section 2.7 hereof, of a portion of the
Loan (the “Partial Defeasance Amount” for such Partial Release Property)
equal to 125% of the allocated loan amount for the Partial Release Property set
forth on Schedule 2.17 hereto; provided, that if Borrower elects
in connection with a Partial Defeasance of a Partial Release Property to
increase the Partial Defeasance Amount for such Partial Release Property
pursuant to the provisions of paragraphs (b) and/or (c) above, the Partial
Defeasance Amount for such Partial Release Property shall be such higher amount
for purposes of such Partial Defeasance.


 


(f)            Borrower will
execute (and Guarantor will consent in writing thereto and reaffirm their
obligations under the Loan Documents to which they are a party notwithstanding
the Partial Release) and deliver all such amendments to the Loan Documents and
other instruments or documents as may be required by Lender (using commercial
standards


 


51

















 


customarily applied with respect to mortgage
loans such as the Loan) in order to continue to fully protect Lender’s lien and
security interest in the remainder of the Mortgaged Property.


 


(g)           Borrower will cause
the Master Homesite Lease(s) to be amended to exclude the Partial Release
Property pursuant to documentation reasonably satisfactory to Lender.


 


(h)           Borrower, at its
sole cost and expense, shall obtain endorsements to Lender’s loan policy of
title insurance satisfactory in form and content to Lender, which endorsements
will (a) affirmatively evidence the continued validity of Lender’s first lien
position created by the Loan Documents through the date of recordation of the
partial release of the Partial Release Property, and (b) insure that the lien
created by the Loan Documents remains a valid first lien on the remainder of
the Mortgaged Property.


 


(i)            Borrower shall pay
for the costs of preparing and recording partial releases, UCC-3 releases, and
any loan modification documents, easements, declarations, and/or restrictive
covenants required by Lender, Lender’s reasonable attorneys’ fees and costs,
all survey charges and costs, all title premiums and costs, documentary stamps
incurred in connection with the release of the Partial Release Property in
accordance with the requirements contained herein, and all other reasonable
out-of-pocket costs, fees, and expenses incurred by Lender in connection with
the requested release of the Partial Release Property.


 


(j)            Borrower shall have
provided Lender with a Rating Confirmation with respect to the Partial Release.


 


(k)           Borrower shall pay
Lender’s reasonable costs and expenses in connection with the Partial Release,
as set forth below.


 


Borrower shall pay or reimburse Lender for all reasonable costs and
expenses incurred by Lender in connection with such request for a Partial
Release, including, but not limited to, the preparation, negotiation and review
of any and all materials required to be provided in connection therewith
(including Lender’s reasonable attorneys’ fees and expenses).


 


Section 2.18.          Laundry
Leases.  Certain laundry facilities
at certain of the Mortgaged Properties have been leased to laundry operators
under laundry room or laundry facility leases (the “Laundry Leases”).  Borrower covenants and agrees that it shall,
within sixty (60) days after the date hereof (or such longer time as Lender may
determine to provide to Borrower at Lender’s sole option) provide copies of
such Laundry Leases to Lender and, if such Laundry Leases are not by their
terms subordinate to the applicable Mortgages, Borrower shall, within sixty
(60) days after the date hereof (or such longer time as Lender may determine to
provide to Borrower at Lender’s sole option) either provide executed
subordination agreements subordinating the Laundry Leases to the applicable
Mortgages or demonstrate to Lender’s reasonable satisfaction that the Laundry
Leases may be terminated by the landlord thereunder at a cost per Laundry Lease
of not more than $10,000.


 


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ARTICLE III.

CONDITIONS PRECEDENT


 


Section 3.1.            Conditions
Precedent to Closing.  The
obligation of the Lender to make the Loan is subject to the satisfaction by
Borrower (and Guarantor, where applicable) or waiver by Lender in writing of
the following conditions no later than the Closing Date:


 


(a)           Loan Agreement.  Borrower and Lender shall have executed and
delivered this Agreement.


 


(b)           Note.  Borrower shall have executed and delivered
to Lender the Note.


 


(c)           Environmental
Indemnity Agreement; Guaranty of Non-Recourse Obligations.  Borrower and Guarantor shall have executed
and delivered the Environmental Indemnity Agreement to Lender.  Guarantor shall have executed and delivered
the Guaranty of Non-Recourse Obligations.


 


(d)           Opinions of
Counsel.  Lender shall have received
from counsel to Borrower, the Member and the Guarantor, legal opinions in form
and substance acceptable to Lender, with respect to corporate matters and with
respect to substantive non-consolidation of Affordable Residential Communities
LP, the Member and the Manager, on the one hand, and Borrower, on the other, in
the event of the bankruptcy of Affordable Residential Communities LP, the
Member or the Manager.  Such legal
opinions shall be addressed to Lender and its successors and assigns, dated the
Closing Date, and in form and substance reasonably satisfactory to Lender and
its counsel.


 


(e)           Organizational
Documents.  Lender shall have
received with respect to each of Borrower, the Member and the Guarantor its
certificate of formation, certificate of limited partnership or certificate of
incorporation, as applicable, as amended, modified or supplemented to the
Closing Date, as filed with the Secretary of State in the jurisdiction of
organization and in effect on the Closing Date and certified to be true,
correct and complete by the appropriate Secretary of State as of a date not
more than thirty (30) days prior to the Closing Date, together with a good
standing certificate from such Secretary of State dated not more than thirty
(30) days prior to the Closing Date and, for Borrower and the Member to the
extent required by applicable law, a good standing certificate from the
Secretaries of State (or the equivalent thereof) of each other State in which
Borrower or the Member is required to be qualified to transact business, each
dated not more than thirty (30) days prior to the Closing Date.


 


(f)            Certified
Resolutions, etc.  Lender shall have
received a certificate of each of Borrower, the Member and the Guarantor dated
the Closing Date, certifying (i) the names and true signatures of its incumbent
officers authorized to sign the Loan Documents to which Borrower, the Member or
the Guarantor is a party, (ii) the Organizational Agreement of each of
Borrower, the Member and Guarantor, in each case as in effect on the Closing Date,
(iii) the resolutions of each of Borrower, the Member and the Guarantor,
approving and authorizing the execution, delivery and performance of the Loan
Documents to which it is a party, and (iv) that there have been no changes in
any Organizational Agreement since the date of execution or preparation
thereof.


 


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(g)           Additional
Matters.  Lender shall have received
such other certificates, opinions, documents and instruments relating to the
Loan as may have been reasonably requested by Lender.  All corporate and other organizational proceedings, all other
documents (including, without limitation, all documents referred to herein and
not appearing as exhibits hereto) and all legal matters in connection with the
Loan shall be reasonably satisfactory in form and substance to Lender in its
sole and absolute discretion.


 


(h)           Transaction Costs.  Borrower shall have paid all Transaction
Costs for which bills have been submitted in accordance with the provisions of Section
8.23.


 


(i)            No Default or
Event of Default.  No event which
would constitute either a Default or Event of Default under this Agreement or
the other Loan Documents shall have occurred and be continuing on the Closing
Date.


 


(j)            No Injunction.  No law or regulation shall have been
adopted, no order, judgment or decree of any Governmental Authority shall have
been issued, and no litigation shall be pending or threatened, which in the
good faith judgment of Lender would enjoin, prohibit or restrain, or impose or
result in the imposition of any material adverse condition upon, the making or
repayment of the Loan or the consummation of the Transaction.


 


(k)           Representations
and Warranties.  The representations
and warranties herein and in the other Loan Documents shall be true and correct
in all material respects on the Closing Date.


 


(l)            Survey;
Appraisal.  Lender shall have
received the Survey and the Appraisal with respect to each Mortgaged Property,
which shall be in form and substance satisfactory to Lender in its sole and
absolute discretion.


 


(m)          Property Condition
Assessment.  Lender shall have
received the Property Condition Assessment with respect to each Mortgaged
Property prepared by the Engineer or another Person acceptable to the Lender,
which Property Condition Assessment shall be acceptable to Lender in its sole
and absolute discretion.


 


(n)           Environmental
Matters.  Lender shall have received
an Environmental Report prepared by an Environmental Auditor with respect to
the Mortgaged Property, which Environmental Report shall be acceptable to
Lender in its sole and absolute discretion.


 


(o)           Financial
Information.  Lender shall have
received financial information relating to the Guarantor, Borrower and the
Mortgaged Property satisfactory to Lender in its sole and absolute
discretion.  Such information shall
include, without limitation, the following, to the extent reasonably available:


 


(i)            operating
statements for the current year (including actual to date information, an
annual budget and trailing twelve month data in hard copy and on diskette) and
for not less than the three preceding years;


 


(ii)           a copy of the
standard lease form, if any;


 


54

















 


(iii)          current property
rent roll data on a tenant by tenant basis in hard copy including the name of
each tenant and the associated Homesite, security deposit, amount due at the
beginning of the month, charges in the current month (including Homesite rent,
water/sewer, gas/electric, trash, mobile home rent, notes and other charges),
payments made during the month, amount due at the end of the month, total
Homesites at the Mortgaged Property and total occupied Homesites at the
Mortgaged Property, with the occupancy level expressed as a percentage);


 


(iv)          the tax bills for
2003 and the historical tax records for 2002;


 


(v)           the most recent
annual financial statements and unaudited quarterly financial statements; and


 


(vi)          such other financial
information as is customarily required by institutional lenders for loans similar
in size and type as the Loan.


 


The annual financial statements relating to the Guarantor shall be
either (x) audited by a “Big Four” accounting firm or another firm of certified
public accountants reasonably acceptable to Lender or (y) prepared in accordance
with agreed upon procedures reasonably acceptable to Lender to be performed by
a “Big Four” accounting firm or another firm of certified public accountants
reasonably acceptable to Lender to create similar information.


 


(p)           Pro-Forma
Financial Statement; Operating Budget. 
Lender shall have received (i) the initial pro-forma financial statement
and Operating Budget for the Mortgaged Property for the following twelve months
(including on an annual and monthly basis a break-down of projected Gross Revenues,
Property Expenses, Capital Improvement Costs, replacement reserve costs and
average occupancy level (expressed as a percentage)) and (ii) a financial
statement that forecasts projected revenues and operating expenses for not less
than three years (including the assumptions used in such forecast).


 


(q)           Site Inspection.  Borrower shall have provided to Lender the
opportunity to perform, or cause to be performed on its behalf, an on-site due
diligence review of the Mortgaged Property, which inspection is satisfactory to
Lender in its sole discretion.


 


(r)            Mortgaged
Property Documents.


 


(i)            Mortgages;
Assignments of Rents and Leases. 
Borrower shall have executed and delivered to Lender the Mortgages and
the Assignments of Rents and Leases with respect to the Mortgaged Property and
such Mortgages and Assignments of Rents and Leases shall have been filed of
record in the appropriate filing office in the jurisdiction in which the
Mortgaged Property is located or irrevocably delivered to a title agent for such
recordation.


 


(ii)           Financing
Statements.  Borrower shall have
executed and delivered to Lender all financing statements required by Lender
pursuant hereto and such financing statements shall have been filed of record
in the appropriate filing offices in each of the appropriate jurisdictions or
irrevocably delivered to a title agent for such recordation.


 


55

















 


(iii)          Management
Agreement and Manager’s Subordination. 
Lender shall have received the executed Management Agreement for the
Mortgaged Property and the Manager shall have executed and delivered the
Manager’s Subordination to Lender.


 


(iv)          Contract
Assignment.  With respect to the
Mortgaged Property, Borrower shall have executed and delivered to Lender a
Contract Assignment with respect to the Mortgaged Property.


 


(s)           Opinions of
Counsel.  Lender shall have received
from counsel to Borrower reasonably acceptable to Lender in each state in which
any Mortgaged Property is located its legal opinion in form and substance
satisfactory to Lender, as to (i) the enforceability of the Mortgages,
Assignments of Rents and Leases and any other Loan Documents governed by the
law of such jurisdiction, (ii) perfection of Liens and security interests and
(iii) other matters referred to therein with respect to each Mortgaged
Property.  The legal opinions will be
addressed to Lender and its successors and assigns, dated the Closing Date, and
in form and substance reasonably satisfactory to Lender and its counsel.


 


(t)            Insurance.  Lender shall have received certificates of
insurance demonstrating insurance coverage in respect of each Mortgaged
Property of types, in amounts, with insurers and otherwise in compliance with
the terms, provisions and conditions set forth in this Agreement.  Such certificates shall indicate that Lender
is a named additional insured and shall contain a loss payee endorsement in
favor of Lender with respect to the property policies required to be maintained
under this Agreement.


 


(u)           Title Insurance Policy.  Lender shall have received countersigned pro
forma title policies or marked binders constituting the unconditional
commitment (in form and substance reasonably satisfactory to Lender) to issue
the Title Insurance Policy covering the Mortgaged Property with an aggregate
amount at least equal to the Loan Amount.


 


(v)           Lien Search
Reports.  Lender shall have received
satisfactory reports of UCC (collectively, the “UCC Searches”), tax
lien, judgment and litigation searches and title updates conducted by the
companies issuing the Title Insurance Policy with respect to the Collateral,
Guarantor, Borrower and the Member, such searches to be conducted in each of
the locations required by Lender.


 


(w)          Consents,
Licenses, Approvals, etc.  Lender
shall have received copies of all consents, licenses and approvals, if any,
required in connection with the execution, delivery and performance by
Borrower, Member and Guarantor and the validity and enforceability, of the Loan
Documents, and such consents, licenses and approvals shall be in full force and
effect.


 


(x)            Additional Real
Estate Matters.  Lender shall have
received such other real estate related certificates and documentation relating
to the Mortgaged Property as Lender may have reasonably requested.  Such documentation shall include the
following as requested by Lender and to the extent reasonably available:


 


(i)            certificates
of occupancy issued by the appropriate Governmental Authorities of the
jurisdiction in which each Mortgaged Property is located reflecting, and
consistent with, the use of each Mortgaged Property as of the Closing Date;


 


56

















 


(ii)           letters from the
appropriate local Governmental Authorities of the jurisdiction in which each
Mortgaged Property is located, certifying that each Mortgaged Property is in
compliance with all applicable zoning laws, rules and regulations, a zoning
endorsement to the applicable Title Insurance Policy with respect to each
Mortgaged Property and/or an acceptable zoning letter from Zoning Information
Services Inc.;


 


(iii)          copies of the
Leases in effect at each Mortgaged Property as Lender may request (in addition
to the copies delivered above); and


 


(iv)          a certified copy of
the purchase and sale agreement (with exhibits), if any, for the Mortgaged
Property.


 


(y)           Closing Statement.  Lender and Borrower shall have agreed upon a
detailed closing statement in a form reasonably acceptable to Lender, which
includes a complete description of Borrower’s sources and uses of funds on the
Closing Date.


 


(z)            Loan-to-Value
Ratio; Debt Service Coverage Test. 
Lender shall have determined that (i) the Loan Amount is not greater
than 80% of the aggregate value of the Mortgaged Property as set forth in the
Appraisals delivered on the Closing Date and (ii) the Debt Service Coverage
Test is satisfied as of the Closing Date.


 


(aa)         Origination Fee.  Lender shall have received its Origination
Fee, which may be retained by Lender from the proceeds of the Loan.


 


Section 3.2.            Execution
and Delivery of Agreement.  The
execution and delivery of this Agreement by each party to this Agreement shall
be deemed to constitute the satisfaction or waiver of the conditions set forth
in Section 3.1; provided, that any such deemed satisfaction or
waiver shall be solely for the purposes of Section 3.1 and shall not be
deemed or construed to constitute a waiver of any other provision of this
Agreement or of any provisions of any of the other Loan Documents, including,
without limitation, any undelivered items undertaking or agreement or other
post-closing agreement or undertaking entered into by Borrower and/or
Guarantor.


 


ARTICLE IV.

REPRESENTATIONS AND WARRANTIES


 


Section 4.1.            Representations
and Warranties as to Borrower. 
Borrower represents and warrants that, as of the Closing Date:


 


(a)           Organization.  Borrower (i) is a duly organized and validly
existing limited liability company in good standing under the laws of the State
of Delaware, (ii) has the requisite power and authority to own its properties
(including, without limitation, the Mortgaged Property) and to carry on its
business as now being conducted and is qualified to do business in the
jurisdiction in which the Mortgaged Property is located, and (iii) has the
requisite power to execute and deliver, and perform its obligations under, this
Agreement, the Note and all of the other Loan Documents to which it is a party.


 


57

















 


(b)           Authorization; No
Conflict; Consents and Approvals. 
The execution and delivery by Borrower of this Agreement, the Note and
each of the other Loan Documents, Borrower’s performance of its obligations
hereunder and under the other Loan Documents and the creation of the security
interests and liens provided for in this Agreement and the other Loan Documents
to which it is a party (i) have been duly authorized by all requisite action on
the part of Borrower, (ii) will not violate any provision of any Legal
Requirements, any order of any court or other Governmental Authority, the
Organizational Agreement or any indenture or agreement or other instrument to
which Borrower is a party or by which Borrower is bound, and (iii) will not be
in conflict with, result in a breach of, or constitute (with due notice or
lapse of time or both) a default under, or result in the creation or imposition
of any Lien of any nature whatsoever upon the Mortgaged Property pursuant to,
any such indenture or agreement or material instrument other than the Loan
Documents.  Other than those obtained or
filed on or prior to the Closing Date, Borrower is not required to obtain any
consent, approval or authorization from, or to file any declaration or
statement with, any Governmental Authority or other agency in connection with
or as a condition to the execution, delivery or performance of this Agreement,
the Note or the other Loan Documents executed and delivered by Borrower.


 


(c)           Enforceability.  This Agreement, the Note and each other Loan
Document executed by Borrower in connection with the Loan (including, without
limitation, any Collateral Security Instrument), is the legal, valid and
binding obligation of Borrower, enforceable against Borrower in accordance with
its terms, subject to bankruptcy, insolvency, and other limitations on
creditors’ rights generally and to equitable principles.  This Agreement, the Note and such other Loan
Documents are not subject to any right of rescission, set-off, counterclaim or
defense by Borrower (including the defense of usury), and Borrower has not
asserted any right of rescission, set-off, counterclaim or defense with respect
thereto.


 


(d)           Litigation.  There are no actions, suits or proceedings
at law or in equity by or before any Governmental Authority or other agency now
pending and served or, to the best knowledge of Borrower, threatened against
Borrower, Guarantor or any Collateral, which actions, suits or proceedings, if
determined against Borrower, Guarantor or such Collateral, are reasonably
likely to result in a Material Adverse Effect.


 


(e)           Agreements.  Borrower is not in default in the
performance, observance or fulfillment of any of the material obligations,
covenants or conditions contained in any agreement or instrument to which it is
a party or by which Borrower or any Collateral is bound which default is
reasonably likely to have a Material Adverse Effect.  Neither Borrower nor Guarantor is a party to any agreement or
instrument or subject to any restriction which restricts such Person’s ability
to conduct its business in the ordinary course or that is reasonably likely to
have a Material Adverse Effect.


 


(f)            No Bankruptcy
Filing.  Neither Borrower nor
Guarantor is contemplating either the filing of a petition by it under any
state or federal bankruptcy or insolvency laws or the liquidation of all or a
material portion of its assets or property. 
To the best knowledge of Borrower, no Person is contemplating the filing
of any such petition against Borrower.


 


(g)           Solvency.  Giving effect to the transactions
contemplated hereby, the fair market value of Borrower’s assets exceeds and
will, immediately following the making of the


 


58

















 


Loan, exceed Borrower’s total liabilities
(including, without limitation, subordinated, unliquidated, disputed and
contingent liabilities).  The fair market
value of Borrower’s assets is and will, immediately following the making of the
Loan, be greater than Borrower’s probable liabilities (including the maximum
amount of its contingent liabilities on its debts as such debts become absolute
and matured).  Borrower’s assets do not
and, immediately following the making of the Loan will not, constitute
unreasonably small capital to carry out its business as conducted or as
proposed to be conducted.  Borrower does
not intend to, and does not believe that it will, incur debts and liabilities
(including, without limitation, contingent liabilities and other commitments)
beyond its ability to pay such debts as they mature (taking into account the
timing and amounts to be payable on or in respect of obligations of Borrower).


 


(h)           Other Debt.  Borrower has not borrowed or received other
debt financing whether unsecured or secured by the Mortgaged Property or any
part thereof which is outstanding as of the Closing Date.  As of the Closing Date, Borrower has no
Other Borrowings other than trade debt expressly permitted under Article VIII
of this Agreement.


 


(i)            Full and
Accurate Disclosure.  No statement
of fact made by or on behalf of Borrower in this Agreement or in any of the
other Loan Documents contains any untrue statement of material fact or omits to
state any material fact necessary to make statements contained herein or
therein not misleading.  To the best
knowledge of Borrower, no financial statements or any other document,
certificate or written statement furnished to Lender by Borrower or Guarantor,
or by any third party on behalf of Borrower or Guarantor, for use in connection
with the Loan contains any untrue representation, warranty or statement of a
material fact, and none omits or will omit to state a material fact necessary
in order to make the statements contained herein or therein not
misleading.  To the best knowledge of
Borrower, there is no fact that has not been disclosed to Lender that is
reasonably likely to result in a Material Adverse Effect.


 


(j)            Financial
Information.  All financial
statements and other data concerning Borrower, Guarantor and the Mortgaged
Property that has been delivered by or on behalf of Borrower or Guarantor to
Lender is true, complete and correct in all material respects and, except as
disclosed on Schedule 4 attached hereto, has been prepared in accordance with
GAAP.  Since the delivery of such data,
except as otherwise disclosed in writing to Lender, there has been no change in
the financial position of Borrower, Guarantor or the Mortgaged Property, or in
the results of operations of Borrower or Guarantor, which change results or is
reasonably likely to result in a Material Adverse Effect.  Neither Borrower nor Guarantor has incurred
any obligation or liability, contingent or otherwise, not reflected in such
financial data, which is likely to have a Material Adverse Effect upon its
business operations or the Mortgaged Property.


 


(k)           Investment
Company Act; Public Utility Holding Company Act.  Borrower is not (i) an “investment company” or a company
“controlled” by an “investment company,” within the meaning of the Investment
Company Act of 1940, as amended, (ii) a “holding company” or a “subsidiary
company” of a “holding company” or an “affiliate” of either a “holding company”
or a “subsidiary company” within the meaning of the Public Utility Holding
Company Act of 1935, as amended, or (iii) subject to any other federal or state
law or regulation which purports to restrict or regulate its ability to borrow
money in accordance with this Agreement.


 


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(l)            Compliance.  Borrower is in compliance with all
applicable Legal Requirements, except for noncompliance that is not reasonably
likely to have a Material Adverse Effect. 
Borrower is not in default or violation of any order, writ, injunction,
decree or demand of any Governmental Authority except for defaults or
violations which are not reasonably likely to have a Material Adverse Effect.


 


(m)          Use of Proceeds;
Margin Regulations.  Borrower will
use the proceeds of the Loan for the purposes described in Section 2.2.  No part of the proceeds of the Loan will be
used for the purpose of purchasing or acquiring any “margin stock” within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System
or for any other purpose which would be inconsistent with such Regulation U or
any other Regulations of such Board of Governors, or for any purposes
prohibited by Legal Requirements.


 


(n)           Organizational
Chart.  The organizational chart set
forth as Schedule 2 accurately sets forth the direct and indirect
ownership structure of Borrower.


 


(o)           No Defaults.  No Default or Event of Default exists under
or with respect to any Loan Document.


 


(p)           Plans and Welfare
Plans.  The assets of Borrower are
not treated as “plan assets” under regulations currently promulgated under
ERISA.  Neither Borrower nor any ERISA
Affiliate sponsors, maintains, contributes to or is required to contribute to
any Plan or Multiemployer Plan nor has the Borrower or any ERISA Affiliate
sponsored, maintained, contributed to or been required to contribute to any
Plan or Multiemployer Plan within the past six years.  There are no pending issues or claims before the Internal Revenue
Service, the United States Department of Labor or any court of competent
jurisdiction related to any Plan or Welfare Plan.  No event has occurred, and there exists no condition or set of
circumstances, in connection with any Plan or Welfare Plan under which Borrower
or, to the best knowledge of Borrower, any ERISA Affiliate, directly or
indirectly (through an indemnification agreement or otherwise), is reasonably
likely to be subject to any material risk of liability under Section 409 or
502(i) of ERISA or Section 4975 of the Code. 
No Welfare Plan provides or will provide benefits, including, without
limitation, death or medical benefits (whether or not insured) with respect to
any current or former employee of Borrower, or, to the best knowledge of
Borrower, any ERISA Affiliate beyond his or her retirement or other termination
of service other than (i) coverage mandated by applicable law, (ii) death or
disability benefits that have been fully provided for by fully paid up
insurance or (iii) severance benefits.


 


(q)           Additional
Borrower UCC Information. 
Borrower’s organizational identification number is 3723695 and the full
legal name of Borrower is as set forth on the signature pages hereof and
Borrower has not done in the last five (5) years, and does not do, business
under any other name (including any trade-name or fictitious business name).


 


(r)            Not Foreign
Person.  Borrower is not a “foreign
person” within the meaning of § 1445(f)(3) of the Code.


 


(s)           Labor Matters.  Borrower is not a party to any collective
bargaining agreements.


 


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(t)            Pre-Closing Date
Activities.  Borrower has not
conducted any business or other activity on or prior to the Closing Date, other
than in connection with the acquisition, management and ownership of the
Mortgaged Property.


 


(u)           No Bankruptcies
or Criminal Proceedings Involving Borrower or Related Parties.  No bankruptcy, insolvency, reorganization or
comparable proceedings have ever been instituted by or against Borrower, any
Affiliate of Borrower, any Guarantor or any individual or entity owning, with
his, her or its family members, 20% or more of the direct, or indirect
beneficial ownership interests in Borrower (each such Guarantor, individual, or
entity being herein referred to as a “Principal”), and no such proceeding is
now pending or contemplated.  None of
Borrower, any Principal, or to Borrower’s knowledge, any other individual or
entity directly or indirectly owning or controlling, or the family members of which
own or control, any direct or indirect beneficial ownership interest in
Borrower or in the Manager or asset manager for the Mortgaged Property, have
been charged, indicted or convicted, or are currently under the threat of
charge, indictment or conviction, for any felony or crime punishable by
imprisonment.


 


(v)           No Prohibited
Persons.  Neither Borrower, Member,
Guarantor nor any of their respective officers, directors, shareholders,
partners, members or Affiliates (including the indirect holders of equity
interests in Borrower) is or will be an entity or person: (i) that is listed in
the Annex to, or is otherwise subject to the provisions of Executive Order
13224 issued on September 24, 2001 (“EO13224”); (ii) whose name appears
on the United States Treasury Department’s Office of Foreign Assets Control (“OFAC”)
most current list of “Specifically Designated National and Blocked Persons”
(which list may be published from time to time in various mediums including,
but not limited to, the OFAC website, http:www.treas.gov/ofac/t11sdn.pdf)(the “OFAC
List”); (iii) who commits, threatens to commit or supports “terrorism”, as
that term is defined in EO 13224; or (iv) who is otherwise affiliated with any
entity or person listed above (any and all parties or persons described in
clauses (i) through (iv) above are herein referred to as a “Prohibited
Person”).  To the best knowledge of
the Borrower, no tenant at the Property currently is identified on the OFAC
List or otherwise qualifies as a Prohibited Person and no tenant at the
Property is owned by or an Affiliate of a Prohibited Person.  Borrower and Manager have implemented and
will continue to follow procedures to ensure that no tenant at the Property is
a Prohibited Person or owned by or an Affiliate of a Prohibited Person.


 


Section 4.2.            Representations
and Warranties as to the Mortgaged Property.  Borrower hereby represents and warrants to Lender that, as to
each Mortgaged Property and the Mortgages, as of the Closing Date:


 


(a)           Title to the
Mortgaged Property.  Borrower owns
good, marketable and insurable fee simple title to each Mortgaged Property
(other than Personalty), free and clear of all Liens, other than the Permitted
Encumbrances.  Borrower owns the
Personalty free and clear of any and all Liens, other than Permitted
Encumbrances.  There are no outstanding
options to purchase or rights of first refusal or restrictions on
transferability affecting any Mortgaged Property or any portion thereof or
interest therein.


 


(b)           Utilities and
Public Access.  Except as disclosed
on Schedule 4, (i) each Mortgaged Property has adequate rights of access to
public ways and is served by public water,


 


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electric, sewer, sanitary sewer and storm
drain facilities; (ii) all public utilities necessary to the continued use and
enjoyment of each Mortgaged Property as presently used and enjoyed are located
in the public right-of-way abutting the premises, and all such utilities are
connected so as to serve each Mortgaged Property without passing over other
property except for land or easement areas of or available to the utility
company providing such utility service; and (iii) all roads necessary for the
full utilization of each Mortgaged Property for its current purpose have been
completed and dedicated to public use and accepted by all Governmental
Authorities or are the subject of access easements for the benefit of each
Mortgaged Property.


 


(c)           Condemnation.  No Taking has been commenced or, to the best
of Borrower’s knowledge, is contemplated with respect to all or any portion of
any Mortgaged Property or for the relocation of roadways providing access to
any Mortgaged Property.


 


(d)           Compliance.  Each Mortgaged Property and the current use
thereof is in compliance with all applicable Legal Requirements (including, without
limitation, building, parking, subdivision, land use, health, fire, safety and
zoning ordinances and codes) and all applicable Insurance Requirements, except
for noncompliance which cannot reasonably be expected to result in a Material
Adverse Effect.  Each Mortgaged Property
is zoned for its current use, which zoning designation is unconditional, in
full force and effect, and is beyond all applicable appeal periods.   In the event that all or any part of the
Improvements located on any Mortgaged Property are destroyed or damaged, said
Improvements can be legally reconstructed to their condition prior to such
damage or destruction, and thereafter exist for the same use without violating
any zoning or other ordinances applicable thereto and without the necessity of
obtaining any variances or special permits, other than customary demolition,
building and other construction related permits.  No legal proceedings are pending or, to the knowledge of
Borrower, threatened with respect to the zoning of the Mortgaged Property.  Neither the zoning nor any other right to
construct, use or operate the Mortgaged Property is in any way dependent upon
or related to any real estate other than the Mortgaged Property.  No tract map, parcel map, condominium plan,
condominium declaration, or plat of subdivision will be recorded by Borrower
with respect to the Mortgaged Property without Lender’s prior written consent.


 


(e)           Environmental
Compliance.  Except for matters set
forth in the Environmental Reports delivered to Lender in connection with the
Loan (true, correct and complete copies of which have been provided to Lender
by Borrower):


 


(i)            Borrower
and each Mortgaged Property is in full compliance with all applicable
Environmental Laws (which compliance includes, but is not limited to, the
possession by Borrower or the Manager of all environmental, health and safety
permits, licenses and other governmental authorizations required in connection
with the ownership and operation of the Mortgaged Property under all
Environmental Laws), except for noncompliance which cannot reasonably be
expected to result in a Material Adverse Effect.


 


(ii)           There is no
material Environmental Claim pending or, to the actual knowledge of Borrower,
threatened, and no penalties arising under Environmental Laws have been
assessed against Borrower, the Manager or any Mortgaged Property, or, to the
actual knowledge of Borrower, against any Person whose liability for any
Environmental


 


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Claim Borrower or the Manager has or may have retained or assumed
either contractually or by operation of law, and no material investigation or
review is pending or, to the actual knowledge of Borrower, threatened by any
Governmental Authority, citizens group, employee or other Person with respect
to any alleged failure by Borrower or the Manager or any Mortgaged Property to
have any environmental, health or safety permit, license or other authorization
required under, or to otherwise comply with, any Environmental Law or with
respect to any alleged liability of Borrower or the Manager for any Use or
Release of any Hazardous Substances.


 


(iii)          There are no
present and, to the best knowledge of the Borrower, there have been no past
material Releases of any Hazardous Substances that are reasonably likely to
form the basis of any Environmental Claim against Borrower, the Manager, any
Mortgaged Property or against any Person whose liability for any Environmental
Claim Borrower or the Manager has or may have retained or assumed either
contractually or by operation of law (other than Hazardous Substances being
used in amounts that are customary for properties such as the Mortgaged
Property and for purposes that are typical for properties such as the Mortgaged
Property and in all cases are utilized in compliance with Environmental Law in
all material respects).


 


(iv)          Without limiting the
generality of the foregoing, to the best knowledge of the Borrower, there is
not present at, on, in or under any Mortgaged Property, any Hazardous Substances
(including, without limitation, PCB-containing equipment, asbestos or asbestos
containing materials, underground storage tanks or surface impoundments for
Hazardous Substances, lead in drinking water or lead based paint) (other than
Hazardous Substances being used in amounts that are customary for properties
such as the Mortgaged Property and for purposes that are typical for properties
such as the Mortgaged Property and in all cases are utilized in compliance with
Environmental Law in all material respects) or any fungus, mold, mildew or
biological agent the presence of which is reasonably likely to materially
adversely affect the value or utility of such Mortgaged Property.


 


(v)           No liens are
presently recorded with the appropriate land records under or pursuant to any
Environmental Law with respect to the Mortgaged Property and no Governmental
Authority has been taking or, to the actual knowledge of Borrower, is in the
process of taking any action that could subject the Mortgaged Property to Liens
under any Environmental Law.


 


(vi)          There have been no
environmental investigations, studies, audits, reviews or other analyses
conducted by or that are in the possession of Borrower in relation to any
Mortgaged Property which have not been made available to Lender.


 


(f)            Mortgage and
Other Liens.  Each Mortgage creates
a valid and enforceable first priority Lien on the applicable Mortgaged
Property described therein, as security for the repayment of the Indebtedness,
subject only to the Permitted Encumbrances applicable to such Mortgaged
Property.  This Agreement creates a
valid and enforceable first priority Lien on all Account Collateral.  Each Collateral Security Instrument establishes
and creates a valid, subsisting and enforceable Lien on and a security interest
in, or claim to, the


 


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rights and property described therein.  All property covered by any Collateral
Security Instrument in which a security interest can be perfected by the filing
of a financing statement is subject to a UCC financing statement filed and/or
recorded, as appropriate (or irrevocably delivered to an agent for such
recordation or filing) in all places necessary to perfect a valid first
priority Lien with respect to the rights and property that are the subject of
such Collateral Security Instrument to the extent governed by the UCC.


 


(g)           Assessments.  There are no pending or, to the best
knowledge of Borrower, proposed special or other assessments for public
improvements or otherwise affecting any Mortgaged Property, nor are there any
contemplated improvements to any Mortgaged Property that may result in such
special or other assessments.


 


(h)           No Joint
Assessment; Separate Lots.  Borrower
has not suffered, permitted or initiated the joint assessment of the Mortgaged
Property (i) with any other real property constituting a separate tax lot, and
(ii) with any portion of the Mortgaged Property which may be deemed to
constitute personal property, or any other procedure whereby the lien of any
taxes which may be levied against such personal property shall be assessed or
levied or charged to the Mortgaged Property as a single lien.  The Mortgaged Property is comprised of one
or more parcels, each of which constitutes a separate tax lot and none of which
constitutes a portion of any other tax lot.


 


(i)            No Prior
Assignment.  Lender is the
collateral assignee of Borrower’s interest under the Leases.  There are no prior assignments of the Leases
or any portion of the Rent due and payable or to become due and payable which
are presently outstanding.


 


(j)            Permits;
Certificate of Occupancy.  Borrower
has obtained all Permits necessary to the use and operation of each Mortgaged
Property, except for noncompliance which cannot reasonably be expected to result
in a Material Adverse Effect.  The use
being made of each Mortgaged Property is in conformity with the certificate of
occupancy and/or such Permits for such Mortgaged Property and any other
restrictions, covenants or conditions affecting such Mortgaged Property, except
for noncompliance which cannot reasonably be expected to result in a Material
Adverse Effect.


 


(k)           Flood Zone.  Except as shown on the Survey, no Mortgaged
Property or any portion thereof is located in a flood hazard area as defined by
the Federal Insurance Administration.


 


(l)            Physical
Condition.  Except as set forth in
the Property Condition Assessment, to the best knowledge of Borrower, each
Mortgaged Property is free of structural defects and all Improvements,
including the building systems contained therein are in good working order
subject to ordinary wear and tear.


 


(m)          Security Deposits.  Borrower and the Manager are in compliance
in all material respects with all Legal Requirements relating to all security
deposits with respect to each Mortgaged Property.


 


(n)           Intellectual
Property.  All material Intellectual
Property that Borrower owns or has pending, or under which it is licensed, are
in good standing and uncontested.  There


 


64

















 


is no right under any
Intellectual Property necessary to the business of Borrower as presently
conducted or as Borrower contemplates conducting its business.  Borrower has not infringed, is not
infringing, and has not received notice of infringement with respect to
asserted Intellectual Property of others. 
There is no infringement by others of material Intellectual Property of
Borrower.


 


(o)           No Encroachments.  Except as shown on the Survey, to the best
knowledge of Borrower, (i) all of the Improvements which were included in
determining the appraised value of each Mortgaged Property lie wholly within
the boundaries and building restriction lines of each Mortgaged Property, (ii)
no improvements on adjoining properties encroach upon any Mortgaged Property, (iii)
no Improvements encroach upon any easements or other encumbrances affecting the
Mortgaged Property, and (iv) all of the Improvements comply with all material
requirements of any applicable zoning and subdivision laws and ordinances.


 


(p)           Management Agreement.  The Management Agreement is in full force
and effect.  There is no default, breach
or violation existing thereunder by Borrower or, to the best knowledge of
Borrower, any other party thereto and no event (other than payments due but not
yet delinquent) which, with the passage of time or with notice and the
expiration of any grace or cure period, would constitute a default, breach or
violation by Borrower or, to the best knowledge of Borrower, any other party
thereunder or entitle Borrower or, to the best knowledge of Borrower, any other
party thereto to terminate any such agreement.


 


(q)           Leases.  No Mortgaged Property is subject to any
Leases other than the Leases described in the rent rolls delivered to Lender in
connection with the making of the Loan. 
No person has any possessory interest in any Mortgaged Property or right
to occupy the same except under and pursuant to the provisions of the
Leases.  The current Leases are in full
force and effect and, except as set forth on the rent rolls delivered to Lender
in connection with the making of the Loan, or as disclosed on Schedule 4,
there are no monetary or other material defaults thereunder by either party and
no conditions which with the passage of time and/or notice would constitute
monetary or other material defaults thereunder.  Except as disclosed on Schedule 4, no portion of the
Mortgaged Property is leased to or occupied by any Affiliate of Borrower.  Except as disclosed on Schedule 4,
all Leases at each Mortgaged Property consist solely of Leases of Homesites and
related common areas, and not of other portions of the Mortgaged Property.  Except as disclosed on Schedule 4,
Borrower does not own any manufactured homes or mobile homes, whether or not
located at the Mortgaged Property.  No
material termination payments or fees are due in the event Borrower cancels or
terminates any commercial Leases to which it is a party.


 


Section 4.3.            Survival
of Representations.  Borrower agrees
that (i) all of the representations and warranties of Borrower set forth in Section
4.1 and 4.2 and in the other Loan Documents delivered on the Closing
Date are made as of the Closing Date, and (ii) all representations and
warranties made by Borrower shall survive the delivery of the Note and making
of the Loan and continue for so long as any amount remains owing to Lender
under this Agreement, the Note or any of the other Loan Documents; provided,
however, that the representations set forth in Section 4.2(e)
shall survive for five (5) years following repayment of the Indebtedness.  All representations, warranties, covenants
and agreements made in this


 


65

















 


Agreement or in the other Loan Documents
shall be deemed to have been relied upon by Lender notwithstanding any investigation
heretofore or hereafter made by Lender or on Lender’s behalf.


 


ARTICLE V.

AFFIRMATIVE COVENANTS


 


Section 5.1.            Affirmative
Covenants.  Borrower covenants and
agrees that, from the date hereof and until payment in full of the
Indebtedness:


 


(a)           Existence;
Compliance with Legal Requirements: Insurance.  Borrower shall do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its existence as a limited
liability company, and any rights, licenses, Permits and franchises necessary
for the conduct of its business and will comply with all Legal Requirements and
Insurance Requirements applicable to it and to each Mortgaged Property in all
material respects.  Borrower shall at
all times maintain, preserve and protect all franchises and trade names and
preserve all the remainder of its property necessary for the continued conduct
of its business and keep the Mortgaged Property in good repair, working order
and condition, except for reasonable wear and use (and except for casualty
losses as to which other provisions hereof shall govern), and from time to time
make, or cause to be made, all reasonably necessary repairs, renewals,
replacements, betterments and improvements thereto.


 


(b)           Basic Carrying
Costs and Other Claims; Contest.


 


(i)            Subject
to Borrower’s contest rights set forth in Section 5.1(b)(ii) below,
Borrower will pay when due (A) all Basic Carrying Costs with respect to
Borrower and the Mortgaged Property; (B) all claims (including claims for
labor, services, materials and supplies) for sums that have become due and
payable and that by law have or may become a Lien upon any of the Mortgaged
Property or its other properties or assets (hereinafter referred to as the “Lien
Claims”); and (C) all federal, state and local income taxes, sales taxes,
excise taxes and all other taxes and assessments of Borrower on its business,
income or assets; in each instance before any penalty or fine is incurred with
respect thereto.  Borrower’s obligation
to pay Basic Carrying Costs pursuant to this Agreement shall include, to the
extent permitted by applicable law, Impositions resulting from future changes
in law which impose upon Lender an obligation to pay any property taxes on the
Mortgaged Property or other Impositions.


 


(ii)           Borrower shall not
be required to pay, discharge or remove any Imposition or Lien Claim so long as
Borrower contests in good faith such Imposition or Lien Claim or the validity,
applicability or amount thereof by an appropriate legal proceeding which
operates to prevent the collection of such amounts and the sale of the
applicable Mortgaged Property or any portion thereof, so long as:


 


(A)          the
Indebtedness shall not have been accelerated, if an Event of Default shall have
occurred and be continuing;


 


(B)           prior
to the date on which such Imposition or Lien Claim would otherwise have become
delinquent, Borrower shall have given Lender prior written notice of its intent
to contest said Imposition or Lien Claim deposited with


 


66

















 


Lender (or with a court of competent jurisdiction or other appropriate
body approved by Lender) such additional amounts as are necessary to keep on
deposit at all times, an amount equal to at least one hundred twenty five
percent (125%) (or such higher amount as may be required by applicable law) of
the total of (x) the balance of such Imposition or Lien Claim then remaining
unpaid, and (y) all interest, penalties, costs and charges accrued or
accumulated thereon, together with such other security as may be required in
the proceeding, or as may be required by Lender, to insure the payment of any
such Imposition or Lien Claim and all interest and penalties thereon; provided,
that notwithstanding the foregoing, with respect to Impositions or Lien Claims
in an amount not in excess of $100,000, Borrower shall not be required to
deposit such amounts with the Lender, so long as Borrower demonstrates to the
reasonable satisfaction of the Lender that Borrower has otherwise reserved such
funds or such funds are otherwise available to the Borrower;


 


(C)           no
risk of sale, forfeiture or loss of any interest in the Mortgaged Property or
any part thereof arises, in Lender’s judgment, during the pendency of such
contest;


 


(D)          such
contest does not, in Lender’s determination, have a Material Adverse Effect;


 


(E)           such
contest is based on bona fide,
material, and reasonable claims or defenses;


 


(F)           such
proceeding shall be permitted under and be conducted in accordance with the
provisions of any other instrument to which Borrower is subject and shall not
constitute a default thereunder and such proceeding shall be conducted in
accordance with all applicable statutes, laws and ordinances; and


 


(G)           Borrower
shall have obtained such endorsements to the Title Insurance Policy with
respect to such Imposition or Lien Claim as Lender may require (or escrowed
with a title insurance company funds sufficient to obtain such endorsements
pursuant to escrow arrangements reasonably satisfactory to Lender).


 


Any such contest shall be prosecuted with due
diligence, and Borrower shall promptly pay the amount of such Imposition or
Lien Claim as finally determined, together with all interest and penalties
payable in connection therewith.  Lender
shall have full power and authority, but no obligation, to apply any amount
deposited with Lender under this subsection to the payment of any unpaid
Imposition or Lien Claim to prevent the sale or forfeiture of the Mortgaged
Property for non-payment thereof, if Lender reasonably believes that such sale
or forfeiture is threatened.  Any
surplus retained by Lender after payment of the Imposition or Lien Claim for
which a deposit was made shall be promptly repaid to Borrower unless an Event
of Default shall have occurred, in which case said surplus may be retained by
Lender to be applied as Lender, in its sole and absolute discretion, may elect.


 


67

















 


(c)           Litigation.  Borrower shall give prompt written notice to
Lender of any material litigation or governmental proceedings pending or
threatened (in writing) against Borrower, or the Mortgaged Property, other than
personal injury litigation which is covered by insurance, eviction matters with
respect to tenants or occupants (in which no counterclaims for material damages
or liabilities are made against Borrower), and matters related to enforcement
of building or zoning codes (as long as the Mortgaged Property is in material
compliance with such building and zoning codes).


 


(d)           Environmental
Remediation.


 


(i)            If
any investigation, site monitoring, cleanup, removal, restoration or other
remedial work of any kind or nature is required pursuant to an order or
directive of any Governmental Authority or under any applicable Environmental
Law, because of or in connection with the current or future presence, suspected
presence, Release or suspected Release of a Hazardous Substance on, under or
from any Mortgaged Property or any portion thereof (collectively, the “Remedial
Work”), Borrower shall promptly commence and diligently prosecute to
completion all such Remedial Work, and shall conduct such Remedial Work in
accordance with the National Contingency Plan promulgated under the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
§ 9601 et seq. (“CERCLA”), if applicable, and in accordance with other
applicable Environmental Laws.  In all
events, such Remedial Work shall be commenced within such period of time as
required under any applicable Environmental Law.  If any fungus, mold, mildew or other biological agent is present
at any Mortgaged Property in a manner or at a level that is reasonably likely
to materially adversely affect the value or utility of such Mortgaged Property
or that poses a significant health risk, the Borrower shall promptly commence
and diligently prosecute to completion the remediation of such condition to the
reasonable satisfaction of the Lender or its servicer.


 


(ii)           If requested by
Lender, all Remedial Work under clause (i) above shall be performed by
contractors, and, if the work is reasonably anticipated to cost in excess of
$75,000, under the supervision of a consulting Engineer, each approved in
advance by Lender which approval shall not be unreasonably withheld or
delayed.  Borrower shall pay all costs
and expenses reasonably incurred in connection with such Remedial Work.  If Borrower does not timely commence and
diligently prosecute to completion the Remedial Work, Lender may (but shall not
be obligated to), upon 10 days prior written notice to Borrower of its intention
to do so, cause such Remedial Work to be performed.  Borrower shall pay or reimburse Lender on demand for all expenses
(including reasonable attorneys’ fees and disbursements, but excluding internal
overhead, administrative and similar costs of Lender) reasonably relating to or
incurred by Lender in connection with monitoring, reviewing or performing any
Remedial Work in accordance herewith.


 


(iii)          Borrower shall not
commence any Remedial Work under clause (i) above, nor enter into any
settlement agreement, consent decree or other compromise relating to any
Hazardous Substances or Environmental Laws without providing notice to Lender
as provided in Section 5.1(f). 
Notwithstanding the foregoing, if the presence or threatened


 


68

















 


presence of Hazardous Substances on, under, about or emanating from the
Mortgaged Property poses an immediate threat to the health, safety or welfare
of any Person or the environment, or is of such a nature that an immediate
response is necessary or required under applicable Environmental Law, Borrower
may complete all necessary Remedial Work. 
In such events, Borrower shall notify Lender as soon as practicable and,
in any event, within three (3) Business Days, of any action taken.


 


(iv)          In the event the
Environmental Report recommends the development of an operation and maintenance
program for any recognized environmental condition at a Mortgaged Property
(including, without limitation, underground storage tanks asbestos and asbestos
containing materials, lead-based paints and lead in water supplies) (“O
& M Program”), Borrower shall develop an O & M Program, as approved
by Lender, in Lender’s sole discretion, and shall, during the term of the Loan,
comply in all respects with the terms and conditions of the O & M Program.


 


(e)           Environmental
Matters: Inspection.


 


(i)            Borrower
shall not knowingly permit any Hazardous Substances to be present on or under
or to emanate from the Mortgaged Property, or migrate from adjoining property
onto or into the Mortgaged Property, except under conditions permitted by
applicable Environmental Laws and, in the event that such Hazardous Substances
are present on, under or emanate from the Mortgaged Property, or migrate onto
or into the Mortgaged Property, Borrower shall cause the removal or remediation
of such Hazardous Substances, in accordance with this Agreement and as required
by Environmental Laws (including, where applicable, the National Contingency
Plan promulgated pursuant to the CERCLA), either on its own behalf or by
causing a tenant or other party legally responsible therefor to perform such
removal and remediation.  Borrower shall
use commercially reasonable efforts to prevent, and to seek the remediation of,
any migration of Hazardous Substances onto or into the Mortgaged Property from
any adjoining property.


 


(ii)           Upon reasonable
prior written notice, Lender shall have the right, except as otherwise provided
under Leases, at all reasonable times during normal business hours to enter
upon and inspect environmental conditions with respect to all or any portion of
any Mortgaged Property, provided that such inspections shall not
unreasonably interfere with the operation or the tenants, residents or
occupants of any Mortgaged Property.  If
Lender has reasonable grounds to suspect that Remedial Work may be required,
Lender shall notify Borrower and, thereafter, may select a consulting Engineer
to conduct and prepare reports of such inspections (with notice to Borrower
prior to the commencement of such inspection). 
Borrower shall be given a reasonable opportunity to review any reports,
data and other documents or materials reviewed or prepared by the Engineer, and
to submit comments and suggested revisions or rebuttals to same.  The inspection rights granted to Lender in
this Section 5.1(e) shall be in addition to, and not in limitation of,
any other inspection rights granted to Lender in this Agreement, and shall
expressly include the right (if Lender reasonably suspects that Remedial Work
may be required) to conduct soil borings, establish ground water monitoring
wells and conduct other customary environmental tests, assessments and audits.


 


69

















 


(iii)          Borrower agrees to
bear and shall pay or reimburse Lender on demand for all sums advanced and
reasonable expenses incurred (including reasonable attorneys’ fees and
disbursements, but excluding internal overhead, administrative and similar
costs of Lender) reasonably relating to, or incurred by Lender in connection
with, the inspections and reports described in this Section 5.1(e) (to
the extent such inspections and reports relate to any Mortgaged Property) in
the following situations:


 


(x)            If
Lender has reasonable grounds to believe, at the time any such inspection is
ordered, that there exists an occurrence or condition that could lead to a
material Environmental Claim;


 


(y)           If
any such inspection reveals an occurrence or condition that is reasonably
likely to lead to a material Environmental Claim with respect to such Mortgaged
Property; or


 


(z)            If
an Event of Default with respect to such Mortgaged Property exists at the time
any such inspection is ordered, and such Event of Default relates to any
representation, covenant or other obligation pertaining to Hazardous
Substances, Environmental Laws or any other environmental matter.


 


(f)            Environmental
Notices.  Borrower shall promptly
provide notice to Lender of:


 


(i)            a
material Environmental Claim asserted by any Governmental Authority with
respect to any Hazardous Substance on, in, under or emanating from any
Mortgaged Property;


 


(ii)           any proceeding,
investigation or inquiry commenced or threatened in writing by any Governmental
Authority, against Borrower, any Affiliate of Borrower or with respect to any
Mortgaged Property concerning the presence, suspected presence, Release or
threatened Release of Hazardous Substances from or onto, in or under any
property not owned by Borrower (including, without limitation, proceedings
under the CERCLA;


 


(iii)          a material Environmental
Claims asserted or threatened against Borrower, against any other party
occupying any Mortgaged Property or any portion thereof which become known to
Borrower or against any Mortgaged Property;


 


(iv)          the discovery by
Borrower of a material occurrence or condition giving rise to an obligation of
the Borrower to the Lender hereunder on any Mortgaged Property or on any real
property adjoining or in the vicinity of any Mortgaged Property;


 


(v)           the commencement or
completion of any Remedial Work; and


 


(vi)          any of the foregoing
clauses (i) - (v) as to which a tenant notifies Borrower under a Lease with
respect to such tenant.


 


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(g)           Copies of Notices.  Borrower shall transmit to Lender copies of
any citations, orders, notices or other written communications received from
any Person and any notices, reports or other written communications submitted
to any Governmental Authority with respect to the matters described in Section
5.1(f).


 


(h)           Environmental
Claims.  Lender may join and
participate in, as a party if Lender so determines, any legal or administrative
proceeding or action concerning the Mortgaged Property or any portion thereof
under any Environmental Law, if, in Lender’s reasonable judgment, the interests
of Lender shall not be adequately protected by Borrower; provided, however,
that Lender shall not participate in day-to-day decision making with respect to
environmental compliance.  Borrower
shall pay or reimburse Lender on demand for all reasonable sums advanced and
reasonable expenses incurred (including reasonable attorneys’ fees and
disbursements, but excluding internal overhead, administrative and similar
costs of Lender) by Lender in connection with any such action or proceeding.


 


(i)            Environmental
Indemnification.  Borrower shall
indemnify, reimburse, defend, and hold harmless Lender, and each of its
respective parents, subsidiaries, Affiliates, shareholders, directors,
officers, employees, representatives, agents, successors, assigns and attorneys
(collectively, the “Indemnified Parties”) for, from, and against all
demands, claims, actions or causes of action, assessments, losses, damages,
liabilities, costs and expenses (including, without limitation, interest,
penalties, reasonable attorneys’ fees, disbursements and expenses, and
reasonable consultants’ fees, disbursements and expenses (but excluding
internal overhead, administrative, lost opportunity and similar costs of
Lender)), asserted against, resulting to, imposed on, or incurred by any
Indemnified Party, directly or indirectly, in connection with any of the
following (except to the extent same are directly and solely caused by the
gross negligence or willful misconduct of any Indemnified Party):


 


(i)            events,
circumstances, or conditions which form the reasonable basis for an
Environmental Claim;


 


(ii)           any pollution or
threat to human health or the environment that is related in any way to
Borrower’s or any previous owner’s or operator’s management, use, control,
ownership or operation of any Mortgaged Property (including, without
limitation, all on-site and off-site activities involving Hazardous
Substances), and whether occurring, existing or arising prior to or from and
after the date hereof, and whether or not the pollution or threat to human
health or the environment is described in the Environmental Reports;


 


(iii)          any Environmental
Claim against any Person whose liability for such Environmental Claim Borrower
has or may have assumed or retained either contractually or by operation of
law; or


 


(iv)          the breach of any
representation, warranty or covenant set forth in Section 4.2(e) and Sections
5.1(d) through 5.1(i), inclusive.


 


The provisions of and undertakings and indemnification set forth in
this Section 5.1(i) shall survive the satisfaction and payment of the
Indebtedness and termination of this Agreement.


 


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(j)            General
Indemnity.


 


(i)            Borrower
shall, at its sole cost and expense, protect, defend, indemnify, release and
hold harmless the Indemnified Parties for, from and against any and all claims,
suits, liabilities (including, without limitation, strict liabilities),
administrative and judicial actions and proceedings, obligations, debts,
damages, losses, costs, expenses, fines, penalties, charges, fees, expenses,
judgments, awards, amounts paid in settlement, and litigation costs, of
whatever kind or nature and whether or not incurred in connection with any
judicial or administrative proceedings (including, but not limited to,
reasonable attorneys’ fees and other reasonable costs of defense) (the “Losses”)
imposed upon or incurred by or asserted against any Indemnified Parties (except
as to any Indemnified Party to the extent same are directly and solely caused
by the gross negligence or willful misconduct of such Indemnified Party) and
directly or indirectly arising out of or in any way relating to any one or more
of the following:


 


(A)          ownership
of the Note or any of the other Loan Documents or otherwise related to the
Mortgaged Property or any interest therein or receipt of any Rents or Accounts;


 


(B)           any
untrue statement of any material fact contained in any information concerning
Borrower, the Mortgaged Property or the Loan or the omission to state therein a
material fact required to be stated in such information or necessary in order
to make the statements in such information or in light of the circumstances
under which they were made not misleading;


 


(C)           any
and all lawful action that may be taken and is taken by the Lender in
connection with the enforcement of the provisions of this Agreement, the Note
or any of the other Loan Documents, whether or not suit is filed in connection
with same, or in connection with Borrower or any Affiliate of Borrower becoming
a party to a voluntary or involuntary federal or state bankruptcy, insolvency
or similar proceeding;


 


(D)          any
accident, injury to or death of persons or loss of or damage to property
occurring in, on or about any Mortgaged Property or any part thereof or on the
adjoining sidewalks, curbs, adjacent property or adjacent parking areas,
streets or ways;


 


(E)           any
use, nonuse or condition in, on or about the Mortgaged Property or any part
thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent
parking areas, streets or ways;


 


(F)           any
failure on the part of Borrower to perform or be in compliance with any of the
terms of this Agreement or any of the other Loan Documents;


 


(G)           performance
of any labor or services or the furnishing of any materials or other property
in respect of the Mortgaged Property or any part thereof pursuant to provisions
of this Agreement;


 


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(H)          the
failure of Borrower to file timely with the Internal Revenue Service an
accurate Form 1099-B, Statement for Recipients of Proceeds from Real Estate,
Broker and Barter Exchange Transactions, which may be required in connection
with this Agreement;


 


(I)            any
failure of the Mortgaged Property to be in compliance with any Legal
Requirement;


 


(J)            the
enforcement by any Indemnified Party of the provisions of this Section
5.1(j); and


 


(K)          any
and all claims and demands whatsoever which may be asserted against Lender by
reason of any alleged obligations or undertakings on its part to perform or
discharge any of the terms, covenants, or agreements contained in any Lease.


 


Any amounts payable to an Indemnified Party by reason of the
application of this Section 5.1(j)(i) shall become due and payable ten
(10) days after written demand and shall bear interest at the Default Rate from
the tenth (10th) day after demand until paid.


 


(ii)           Borrower
shall, at its sole cost and expense, protect, defend, indemnify, release and
hold harmless the Indemnified Parties from and against any and all Losses
imposed upon or incurred by or asserted against any of the Indemnified Parties
and directly or indirectly arising out of or in any way relating to any tax on
the making and/or recording of this Agreement, the Note or any of the other
Loan Documents.


 


(iii)          Borrower shall, at
its sole cost and expense, protect, defend, indemnify, release and hold
harmless the Indemnified Parties from and against any and all Losses
(including, without limitation, reasonable attorneys’ fees and costs) that the
Indemnified Parties may incur, directly or indirectly, as a result of a default
under Borrower’s covenants with respect to ERISA and employee benefits plans
contained herein, including, without limitation, any costs or expenses incurred
in the investigation, defense, and settlement of Losses incurred in correcting
any prohibited transaction or in the sale of a prohibited loan, and in
obtaining any individual prohibited transaction exemption under ERISA that may
be required, in the Lender’s reasonable discretion).


 


(iv)          Promptly after
receipt by an Indemnified Party under this Section 5.1(j) of notice of
the making of any claim or the commencement of any action, such Indemnified
Party shall, if a claim in respect thereof is to be made by such Indemnified
Party against Borrower under this Section 5.1(j), notify Borrower in
writing, but the omission so to notify Borrower will not relieve Borrower from
any liability which it may have to any Indemnified Party under this Section
5.1(j) or otherwise.  In case any
such claim is made or action is brought against any Indemnified Party and such
Indemnified Party seeks or intends to seek indemnity from Borrower, Borrower
will be entitled to participate in, and, to the extent that it may wish, to
assume the defense thereof with counsel reasonably satisfactory to the
Indemnified Party; and, upon receipt of notice from Borrower to such
Indemnified Party of its election so to assume the defense of such claim or
action and


 


73

















 


only upon approval by the Indemnified Party of such counsel (such
approval not to be unreasonably withheld or delayed), Borrower will not be
liable to such Indemnified Party under this Section 5.1(j) for any legal
or other expenses subsequently incurred by such Indemnified Party in connection
with the defense thereof. 
Notwithstanding the preceding sentence, each Indemnified Party will be
entitled to employ counsel separate from such counsel for Borrower and from any
other party in such action if such Indemnified Party reasonably determines that
a conflict of interest exists which makes representation by counsel chosen by
Borrower not advisable.  In such event,
Borrower shall pay the reasonable fees and disbursements of such separate
counsel.  Borrower shall not, without
the prior written consent of an Indemnified Party, which consent shall not be
unreasonably withheld or delayed, settle or compromise or consent to the entry
of any judgment with respect to any pending or threatened claim, action, suit
or proceeding in respect of which indemnification may be sought hereunder
(whether or not such Indemnified Party is an actual or potential party to such
claim or action) unless such settlement, compromise or consent includes an
unconditional release of each Indemnified Party from all liability arising out
of such claim, action, suit or proceeding. 
Each Indemnified Party shall not enter into a settlement of or consent
to the entry of any judgment with respect to any action, claim, suit or
proceeding as to which an Indemnified Party would be entitled to
indemnification hereunder without the prior written consent of Borrower, which
consent shall not be unreasonably withheld or delayed.


 


The provisions of and undertakings and indemnification set forth in
this Section 5.1(j) shall survive the satisfaction and payment of the
Indebtedness and termination of this Agreement.


 


(k)           Access to
Mortgaged Property.  Borrower shall
permit agents, representatives and employees of Lender to inspect each
Mortgaged Property or any part thereof at such reasonable times as may be
requested by Lender upon reasonable advance written notice (except during an
Event of Default), subject, however, to the rights of Borrower and of the
tenants of the Mortgaged Property.


 


(l)            Notice of
Default.  Borrower shall promptly
advise Lender in writing of any change in Borrower’s condition, financial or
otherwise, that is reasonably likely to have a Material Adverse Effect, or of
the occurrence of any Default or Event of Default.


 


(m)          Cooperate in Legal
Proceedings.  Except with respect to
any claim by Borrower, the Member or the Guarantor against Lender, Borrower
shall reasonably cooperate with Lender with respect to any proceedings before
any Governmental Authority that are reasonably likely to in any way materially
affect the rights of Lender hereunder or any rights obtained by Lender under
any of the Loan Documents and, in connection therewith, shall not prohibit
Lender, at its election, from participating in any such proceedings.


 


(n)           Perform Loan
Documents.  Borrower shall observe,
perform and satisfy all the terms, provisions, covenants and conditions
required to be observed, performed or satisfied by it, and shall pay when due
all costs, fees and expenses required to be paid by it, under the Loan
Documents.


 


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(o)           Insurance
Benefits.  Borrower shall reasonably
cooperate with Lender in obtaining for Lender the benefits of any Insurance
Proceeds lawfully or equitably payable to Borrower or Lender in connection with
any Mortgaged Property.  Lender shall be
reimbursed for any expenses reasonably incurred in connection therewith
(including reasonable attorneys’ fees and disbursements, but excluding internal
overhead, administrative and similar costs of Lender) out of such Insurance
Proceeds, all as more specifically provided in this Agreement.


 


(p)           Further
Assurances.  Borrower shall, at
Borrower’s sole cost and expense:


 


(i)            upon
Lender’s reasonable request therefor given from time to time, pay for (a)
reports of UCC, tax lien, judgment and litigation searches with respect to
Borrower, and (b) searches of title to the Mortgaged Property, each such search
to be conducted by search firms designated by Lender in each of the locations
designated by Lender;


 


(ii)           furnish to Lender
all instruments, documents, certificates, title and other insurance reports and
agreements, and each and every other document, certificate, agreement and
instrument required to be furnished pursuant to the terms of the Loan
Documents;


 


(iii)          execute and deliver
to Lender such documents, instruments, certificates, assignments and other
writings, and do such other acts necessary, to evidence, preserve and/or
protect the Collateral at any time securing or intended to secure the Note, as
Lender may reasonably require (including, without limitation, tenant estoppel
certificates, an amended or replacement Mortgages, UCC financing statements or
Collateral Security Instruments); and


 


(iv)          do and execute all
and such further lawful and reasonable acts, conveyances and assurances for the
better and more effective carrying out of the intents and purposes of this
Agreement and the other Loan Documents, as Lender shall reasonably require from
time to time.


 


(q)           Management of
Mortgaged Property.


 


(i)            Each
Mortgaged Property shall be managed at all times by the current Manager or
another manager reasonably satisfactory to Lender, pursuant to a Management
Agreement.  Any such Manager may be an
Affiliate of Borrower, provided that: 
(a) the terms and conditions of such Manager’s engagement are at arm’s
length, reasonable, competitive and customary in the applicable marketplace;
and (b) Lender has approved such Manager and such terms, which approval shall
not be unreasonably withheld or delayed. 
The Management Agreement, dated as of the date hereof, between the
Borrower and the Manager is deemed approved by Lender in all respects.  Borrower shall cause the Manager of the
Mortgaged Property to agree that such Manager’s Management Agreement is subject
and subordinate in all respects to the Indebtedness and to the Lien of the
Mortgages.  A Management Agreement may
be terminated or assigned by the Manager (1) by Borrower at any time in
accordance with the provisions of such Management Agreement so long as a successor
or assignee Manager as specified below shall have been appointed and approved
and such successor Manager has (i) entered into


 


75

















 


(or assumed) a Management Agreement in form and substance approved by
Lender, which approval shall not be unreasonably denied, conditioned or
delayed, and (ii) has executed and delivered a Manager’s Subordination to
Lender, and (2) by Lender upon thirty (30) days’ prior written notice to
Borrower and the Manager (a) upon the occurrence and continuation of an Event
of Default or (b) if the Manager commits any act which would permit termination
under the Management Agreement (subject to any applicable notice, grace and
cure periods provided in the Management Agreement) or (c) if a change of
majority control occurs with respect to the Manager.  Notwithstanding the foregoing, any successor manager selected
hereunder by Lender or Borrower to manage the Mortgaged Property shall be a
reputable management company having substantial experience in the management of
real property of a similar type, size and quality in the state in which the
Mortgaged Property is located.  Borrower
may from time to time appoint a successor manager to manage the Mortgaged
Property with Lender’s prior written consent, such consent not to be unreasonably
withheld.  Borrower acknowledges and
agrees that any consent or approval requested of Lender under this Section may
be conditioned by Lender, at Lender’s discretion, upon Borrower first obtaining
a Rating Confirmation with respect to such change in management, and Lender
shall not be deemed to be acting unreasonably in requiring such a Rating
Confirmation.  Borrower further
covenants and agrees that any manager of Mortgaged Property shall at all times
while any Indebtedness is outstanding maintain worker’s compensation insurance
as required by Governmental Authorities.


 


(ii)           Borrower further
covenants and agrees that each Mortgaged Property shall be operated pursuant to
the Management Agreement and that Borrower shall:  (w) promptly perform and/or observe all of the material covenants
and agreements required to be performed and observed by it under the Management
Agreement and do all things reasonably necessary to preserve and to keep
unimpaired its material rights thereunder; (x) promptly notify Lender of any
material default under the Management Agreement of which it is aware; (y)
promptly deliver to Lender a copy of each financial statement, business plan,
capital expenditures plan, notice and report received by it under the
Management Agreement, including, but not limited to, financial statements; and
(z) promptly enforce the performance and observance of the covenants and
agreements required to be performed and/or observed by the Manager under the
Management Agreement.


 


(r)            Financial
Reporting.


 


(i)            Borrower
shall keep and maintain or shall cause to be kept and maintained on a Fiscal
Year basis in accordance with GAAP consistently applied, books, records and
accounts reflecting in reasonable detail all of the financial affairs of
Borrower and all items of income and expense in connection with the operation
of the Mortgaged Property and ownership of the Mortgaged Property and in
connection with any services, equipment or furnishings provided in connection
with the operation of the Mortgaged Property, whether such income or expense
may be realized by Borrower or by any other Person whatsoever.  Lender shall have the right from time to
time at all times during normal business hours upon reasonable prior written notice
to Borrower to examine such books, records and accounts at the office of
Borrower or other Person maintaining such


 


76

















 


books, records and accounts and to make such copies or extracts thereof
as Lender shall desire.  During the
continuation of an Event of Default (including, without limitation, an Event of
Default resulting from the failure of Borrower to deliver any of the financial
information required to be delivered pursuant to this Section 5.1(r)),
Borrower shall pay any reasonable costs and expenses incurred by Lender to
examine Borrower’s accounting records, as Lender shall reasonably determine to
be necessary or appropriate in the protection of Lender’s interest.


 


(ii)           Borrower shall
furnish to Lender annually, within ninety (90) days following the end of each
Fiscal Year, a complete copy of Borrower’s and Guarantor’s financial
statements, each audited by a “Big Four” accounting firm or such other
Independent certified public accountant acceptable to Lender in accordance with
GAAP consistently applied covering Borrower’s and Guarantor’s respective
financial position and results of operations, for such Fiscal Year and
containing a statement of revenues and expenses, a statement of assets and
liabilities and a statement of Borrower’s or Guarantor’s (as applicable)
equity, all of which shall be in form and substance reasonably acceptable to
Lender.  Any audit requirements of the
Borrower pursuant to this Agreement may be satisfied by delivery of the audited
consolidated financial statements of the Guarantor, provided that such
financial statements of the Guarantor contain (i) a separate income and expense
statement for the Borrower and (ii) a separate balance sheet, including a
statement of Borrower’s equity.  Lender
shall have the right from time to time to review and consult with respect to
the auditing procedures used in the preparation of such annual financial
statements.  Together with Borrower’s
and Guarantors’ annual financial statements, Borrower shall furnish, and cause
Guarantor to furnish, to Lender an Officer’s Certificate certifying as of the
date thereof (x) that the annual financial statements present fairly in all
material respects the results of operations and financial condition of Borrower
or Guarantor, as applicable, all in accordance with GAAP consistently applied,
and (y) whether there exists an Event of Default or Default, and if such Event
of Default or Default exists, the nature thereof, the period of time it has
existed and the action then being taken to remedy same.


 


(iii)          Borrower shall
furnish to Lender, within forty-five (45) days following the end of each Fiscal
Year quarter true, complete and correct quarterly unaudited financial
statements (including statements of cash flow) prepared in accordance with GAAP
with respect to Borrower and Guarantor for the portion of the Fiscal Year then
ended.


 


(iv)          No later than thirty
(30) days following the end of each of the months of December, March, June, and
September, beginning with the month ending at March 31, 2004, Borrower shall
prepare and deliver to Lender and its servicer a statement (each a “Quarterly
Statement”) in substantially the form of Schedule 8 hereto, setting
forth with respect to the Mortgaged Property,


 


(A)          a
rent roll dated as of the last day of such quarter identifying the name of each
tenant and the associated Homesite, security deposit, amount due at the
beginning of the month, charges in the current month (including Homesite rent,
water/sewer, gas/electric, trash, mobile home rent, notes amount and other charges),
payments made during the month, amount due at the end of the month,


 


77

















 


total Homesites at the Mortgaged Property and total occupied Homesites
at the Mortgaged Property, with the occupancy level expressed as a percentage;


 


(B)           quarterly
and year-to-date operating statements, each of which shall include an
itemization of budgeted and actual (not pro forma) capital expenditures during
the applicable period, and which shall be prepared for each individual
Mortgaged Property and, on a consolidated basis, for all the Mortgaged
Property; and


 


(C)           a
quarterly and year-to-date comparison of the budgeted income and expenses with
the actual income and expenses for such quarter and year to date, together with
if requested by Lender, a detailed explanation of any variances between
budgeted and actual amounts that are in excess of five percent (5%) for each
line item therein.


 


(v)           Within
thirty (30) days after the end of each calendar month (and as to rent rolls requested
by Lender on an interim basis, within thirty (30) days after Lender’s request
therefor), Borrower shall provide to Lender and its servicer a statement (each
a “Monthly Statement”) in substantially the form of Schedule 9
hereto, setting forth with respect to the Mortgaged Property


 


(A)          a
certified rent roll, for each individual Mortgaged Property containing the
information referred to in Section 5.1(r)(iv)(A),


 


(B)           a
certification of all prepaid Rent that has been collected for each individual
Mortgaged Property more than one (1) month in advance of its due date,


 


(C)           monthly
operating financial statements for the last twelve (12) months, including a
comparison on a year-to-date basis to budget and prior year, for each
individual Mortgaged Property and, on a consolidated basis, for Borrower, and


 


(D)          a
monthly occupancy report which includes data quantifying the total number of
Homesites, beginning occupancy, monthly move-in and move-out data for
residents, rentals and change of occupancy, ending monthly occupancy, ending
monthly occupancy percentage, budgeted occupancy percentage, total rentals,
rentals as a percentage of Homesites, total occupied rentals, rental occupancy
percentage, total repossessions and repossessions as a percentage of total Homesites.


 


(vi)          Borrower
shall furnish to Lender, within fifteen (15) Business Days after request, such
further information with respect to the operation of the Mortgaged Property and
the financial affairs of Borrower as may be reasonably requested by Lender,
including all business plans prepared for Borrower.


 


(vii)         Borrower shall
furnish to Lender, within fifteen (15) Business Days after request, such
further information regarding any Plan or Multiemployer Plan and any


 


78

















 


reports or other information required to be filed under ERISA as may be
reasonably requested by Lender in writing.


 


(viii)        At least thirty (30)
days prior to the end of each of Borrower’s Fiscal Years, Borrower shall submit
or cause to be submitted to Lender for its approval, such approval not to be
unreasonably withheld or delayed, an Operating Budget for Property Expenses,
Capital Improvement Costs, Leasing Commissions, and replacement reserve costs
for the next Fiscal Year for the Mortgaged Property.  Such Operating Budget may allow for a ten percent (10%) line item
variance.  Until so approved by Lender
for the subsequent Fiscal Year in accordance with the procedure set forth in
Section 5.1(r)(ix) below, the Operating Budget approved by Lender for the
preceding Fiscal Year shall remain in effect for purposes of Section 2.12;
provided, that for so long as such prior Operating Budget remains in
effect, amounts set forth in the prior Operating Budget with respect to
Property Expenses shall be deemed increased with respect to actual increases in
Basic Carrying Costs and non-discretionary utility expenditures and shall be
deemed increased by three percent (3%) with regard to discretionary items.  Promptly following the occurrence and during
the continuance of an Event of Default, the Borrower shall submit or cause to
be submitted to Lender a Working Capital Budget for the remainder of the Fiscal
Year during which such Event of Default occurs and by not later than the end of
each of Borrower’s Fiscal Years with respect to the subsequent Fiscal Year.


 


(ix)           Borrower shall
submit any proposed Operating Budget in writing sent by recognized overnight
delivery service or by registered or certified mail (and simultaneously shall
contact the Lender by telephone and by electronic mail) in accordance with the
terms of this Agreement (the “First Notice”), requesting Lender’s
approval of such Operating Budget. 
Lender shall use reasonable efforts to deliver to Borrower its written
approval or disapproval of the proposed Operating Budget within ten (10)
Business Days after Lender shall have received the First Notice.  Unless Lender shall have approved the
Operating Budget contained in the First Notice, Lender’s approval shall be
deemed to be withheld.  If Borrower does
not receive Lender’s response at the end of such ten (10) Business Days period,
Borrower may resubmit its written request to Lender (the “Second Notice”).  The Second Notice shall make reference to
the First Notice and shall bear the following legend in capital letters:


 


“LENDER’S FAILURE TO RESPOND TO THIS REQUEST FOR APPROVAL WITHIN TEN
(10) BUSINESS DAYS FOLLOWING RECEIPT SHALL BE DEEMED TO CONSTITUTE LENDER’S
CONSENT TO THE OPERATING BUDGET DESCRIBED HEREIN.”


 


If Lender does not approve or disapprove the proposed Operating Budget
within ten (10) Business Days after Lender shall have received Borrower’s
Second Notice, Lender shall be deemed to have approved the proposed Operating
Budget.


 


(x)            Together
with the financial statements, rent rolls, operating statements and other
documents and information provided to Lender by or on behalf of Borrower under
this Section, Borrower also shall deliver to Lender a certification in form and
substance


 


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reasonably satisfactory to Lender, executed on behalf of Borrower by
its chief executive officer or chief financial officer (or by the individual
Guarantor if the Guarantor is an individual) stating that, to such officer’s or
individual’s knowledge, such financial statements, rent rolls, operating
statements and other documents and information are true and complete in all
material respects.


 


(xi)           For purposes of
this Section 5.1(r), all of the financial reporting requirements may be
satisfied by the Borrower posting the required deliveries on a secure website
reasonably satisfactory to the Lender and sending to the Lender and its
servicer each month an electronic mail communication notifying the Lender and
its servicer of the linkage to such website; provided that notwithstanding the
foregoing, in the event the Lender includes the Loan in a Secondary Market
Transaction in which Securities are issued or otherwise changes the identity of
its servicer to a Person other than the initial servicer identified to the Borrower
as of the Closing Date, then the Lender may require that such deliveries be
made to Lender and its servicer in hard copy and on diskette or through
electronic mail (including Microsoft Excel format), in form and substance
reasonably acceptable to Lender.


 


(s)           Operation of
Mortgaged Property.  Borrower shall
cause the operation of each Mortgaged Property to be conducted at all times in
a manner consistent with at least the level of operation of such Mortgaged
Property as of the Closing Date, including, without limitation, the following:


 


(i)            to
maintain or cause to be maintained the standard of each Mortgaged Property at
all times at a level not lower than that maintained by prudent managers of
similar facilities or land in the region where the Mortgaged Property is
located;


 


(ii)           to operate or cause
to be operated each Mortgaged Property in a prudent manner in compliance in all
material respects with applicable Legal Requirements and Insurance Requirements
relating thereto and maintain or cause to be maintained all material licenses,
Permits and any other agreements necessary for the continued use and operation
of each Mortgaged Property; and


 


(iii)          to maintain or
cause to be maintained sufficient Inventory and Equipment of types and
quantities at each Mortgaged Property to enable Borrower to operate each
Mortgaged Property and to comply in all material respects with all Leases
affecting each Mortgaged Property.


 


(t)            Material
Agreements.  Except for Leases and
any Management Agreement complying with the Loan Documents, Borrower shall not
enter into or become obligated under any material agreement pertaining to the
Mortgaged Property, including without limitation brokerage agreements, unless
the same may be terminated without cause and without payment of a penalty or
premium, on not more than thirty (30) days’ prior written notice.  Borrower will (A) comply with the
requirements of all present and future applicable laws, rules, regulations and
orders of any governmental authority in all jurisdictions in which it is now
doing business or may hereafter be doing business, (B) maintain all material
licenses and permits now held or hereafter acquired by Borrower, and (C)
perform, observe, comply and fulfill all of its obligations,


 


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covenants and conditions contained in any
material agreement pertaining to the Mortgaged Property.


 


(u)           ERISA.  Borrower shall deliver to Lender as soon as
possible, and in any event within ten days after Borrower knows or has reason
to believe that any of the events or conditions specified below with respect to
any Plan or Multiemployer Plan has occurred or exists, an Officer’s Certificate
setting forth details respecting such event or condition and the action, if
any, that Borrower or its ERISA Affiliate proposes to take with respect thereto
(and a copy of any report or notice required to be filed with or given to PBGC
by Borrower or an ERISA Affiliate with respect to such event or condition):


 


(i)            any
reportable event, as defined in Section 4043(b) of ERISA and the regulations
issued thereunder, with respect to a Plan, as to which PBGC has not by
regulation waived the requirement of Section 4043(a) of ERISA that it be
notified within thirty (30) days of the occurrence of such event (provided that
a failure to meet the minimum funding standard of Section 412 of the Code or
Section 302 of ERISA, including, without limitation, the failure to make on or
before its due date a required installment under Section 412(m) of the Code or
Section 302(e) of ERISA, shall be a reportable event regardless of the issuance
of any waivers in accordance with Section 412(d) of the Code); and any request
for a waiver under Section 412(d) of the Code for any Plan;


 


(ii)           the distribution
under Section 4041(c) of ERISA of a notice of intent to terminate any Plan or
any action taken by Borrower or an ERISA Affiliate to terminate any Plan;


 


(iii)          the institution by
PBGC of proceedings under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan, or the receipt by Borrower or
any ERISA Affiliate of Borrower of a notice from a Multiemployer Plan that such
action has been taken by PBGC with respect to such Multiemployer Plan;


 


(iv)          the complete or
partial withdrawal from a Multiemployer Plan by Borrower or any ERISA Affiliate
of Borrower that results in material liability under Section 4201 or 4204 of
ERISA (including the obligation to satisfy secondary liability as a result of a
purchaser default) or the receipt by Borrower or any ERISA Affiliate of
Borrower of notice from a Multiemployer Plan that it is in reorganization or
insolvency pursuant to Section 4241 or 4245 of ERISA or that it intends to
terminate or has terminated under Section 4041A of ERISA;


 


(v)           the institution of a
proceeding by a fiduciary of any Multiemployer Plan against Borrower or any
ERISA Affiliate of Borrower to enforce Section 515 of ERISA, which proceeding
is not dismissed within thirty (30) days;


 


(vi)          the adoption of an
amendment to any Plan that, pursuant to Section 401(a)(29) of the Code or
Section 307 of ERISA, would result in the loss of tax-exempt status of the
trust of which such Plan is a part if Borrower or an ERISA Affiliate of


 


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Borrower fails to timely provide security to the Plan in accordance
with the provisions of said Sections; and


 


(vii)         the imposition of a
lien or a security interest in connection with a Plan.


 


(v)           Intentionally
Omitted.


 


(w)          Secondary Market
Transaction.  Borrower acknowledges
that Lender and its successors and assigns may (i) sell the Loan to one or more
investors as a whole loan, (ii) participate the Loan to one or more investors,
(iii) deposit the Loan with a trust, which trust may sell certificates to
investors evidencing an ownership interest in the trust assets, or (iv)
otherwise sell the Loan or interests therein to investors (the transactions
referred to in clauses (i) through (iv) above are hereinafter
each referred to as a “Secondary Market Transaction”).  Borrower shall cooperate with Lender in
attempting to effect or effecting any such Secondary Market Transaction and
shall cooperate in attempting to implement or implementing all requirements
imposed by any Rating Agency involved in any Secondary Market Transaction,
including but not limited to,


 


(i)            providing
Lender an estoppel certificate and such information, legal opinions and
documents (including updated non-consolidation opinions) relating to Borrower,
the Guarantor, the Member, the Mortgaged Property and any tenants of the
Mortgaged Property as Lender or the Rating Agencies or other Interested Parties
(as defined below), may reasonably request in connection with such Secondary
Market Transaction, including, without limitation, updated financial information,
appraisals, market studies, environmental reviews (Phase I’s and, if
appropriate, Phase II’s), Mortgaged Property condition reports and other due
diligence investigations together with appropriate verification of such updated
information and reports through letters of auditors and consultants, as of the
closing date of the Secondary Market Transaction,


 


(ii)           amending the Loan
Documents and Organizational Agreement of Borrower, updating and/or restating
officer’s certificates, title insurance and other closing items, and providing
updated representations and warranties in Loan Documents and such additional
representations and warranties as may be required by Lender or the Rating
Agencies, provided such amendment or update (1) shall not change any of the financial
terms of the Loan or result in a material increase in the Borrower’s
obligations or a material decrease in the Borrower’s rights and (2) with
respect to any amendment of an Organizational Agreement, must have been
required by the Rating Agencies,


 


(iii)          participating in
bank, investors and Rating Agencies’ meetings if requested by Lender,


 


(iv)          upon Lender’s
request, amending the Loan Documents (and updating and/or restating officer’s
certificates, title insurance and other closing items in connection therewith)
to divide the Loan into a first and a second mortgage loan, or into a one or
more loans secured by mortgages and by ownership interests in Borrower in
whatever proportion Lender determines, which separated loans may have different
interest rates and amortization schedules (but with aggregated financial terms
which are equivalent to


 


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that of the Loan prior to such separation, including, so long as an
Event of Default has not occurred and is not continuing, a ratable allocation
of prepayments among the Loan components) and thereafter to engage in separate
Secondary Market Transactions with respect to all or any part of the
indebtedness and loan documentation, and


 


(v)           reviewing the
offering documents relating to any Secondary Market Transaction to ensure that
all information concerning Borrower, the Guarantor, the Mortgaged Property, and
the Loan is correct, and certifying to the accuracy thereof.


 


Lender shall be permitted to share all such information with the
investment banking firms, Rating Agencies, accounting firms, law firms and
other third-party advisory firms and trustees, purchasers, transferees,
assignees, trustees, servicers and actual or potential investors involved with
the Loan and the Loan Documents or the applicable Secondary Market Transaction
(collectively, “Interested Parties”). 
Lender and all of the aforesaid Interested Parties shall be entitled to
rely on the information supplied by, or on behalf of, Borrower.  Lender may publicize the existence of the
Loan in connection with its marketing for a Secondary Market Transaction or
otherwise as part of its business development. 
Borrower shall provide such reasonable access to the Mortgaged Property
and personnel of the Manager and of Borrower’s constituent members and the
business and operations of all of the foregoing as Lender or other Interested
Parties may request in connection with any such Secondary Market
Transaction.  Borrower understands that
any such information may be incorporated into any offering circular,
prospectus, prospectus supplement, private placement memorandum or other
offering documents for any Secondary Market Transaction.  Without limiting the foregoing, Borrower and
Guarantor shall provide in connection with each of (i) a preliminary and a
final private placement memorandum or (ii) a preliminary and final prospectus
or prospectus supplement, as applicable (the documents referred to in the
foregoing clauses (i) and (ii), collectively, the “Disclosure Documents”),
an agreement certifying that Borrower and Guarantor have examined such
Disclosure Documents specified by Lender and that each such Disclosure
Document, as it relates to Borrower, Guarantor, any Affiliates, the Mortgaged
Property and Manager, does not contain any untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
made, in the light of the circumstances under which they were made, not
misleading (a “Disclosure Certificate”).  Borrower and Guarantor shall indemnify, defend, protect and hold
harmless Lender, its Affiliates, directors, employees, agents and each Person,
if any, who controls Lender or any such Affiliate within the meaning of Section
15 of the Securities Act of 1933 or Section 20 of the Securities Exchange Act
of 1934, and any other placement agent or underwriter with respect to any
Securitization or Secondary Market Transaction from and against any losses,
claims, damages, liabilities, costs and expenses (including, without limitation,
reasonable attorneys’ fees and disbursements) that arise out of or are based
upon any untrue statement of any material fact contained in any Disclosure
Certificate or other information or documents furnished by Borrower, Guarantor
or their Affiliates or in any representation or warranty of any Borrower
contained herein or in the other Loan Documents or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated in such information or necessary in order to make the statements
in such information not materially misleading. 
In any Secondary Market Transaction, Lender may transfer its obligations
under this Loan Agreement and under the other Loan Documents (or may transfer
the portion thereof corresponding to the transferred portion of the
Indebtedness), and thereafter Lender shall be relieved of any obligations
hereunder and under the other Loan Documents arising after the date


 


83

















 


of said transfer with respect to the transferred interest.  Each transferee investor shall become a
“Lender” hereunder.  The holders from
time to time of the Loan and/or any other interest of the “Lender” under this
Loan Agreement and the other Loan Documents may from time to time enter into
one or more co-lender or similar agreements in their discretion.  Borrower acknowledges and agrees that such
agreements, as the same may from time to time be amended, modified or restated,
may govern the exercise of the powers and discretionary authority of the Lender
hereunder and under the other Loan Documents, but Borrower shall be entitled to
rely upon any actions taken by Lender or the designated servicer(s) or agent(s)
for Lender, whether or not within the scope of its power and authority under
such other agreements.  Lender shall be
responsible for the payment of the expenses incurred by Lender in connection
with any Secondary Market Transaction, and if Lender requires Borrower’s
cooperation in connection with any Secondary Market Transaction, Borrower shall
be entitled to obtain reimbursement from Lender for reasonable out-of-pocket
costs and expenses, including reasonable legal fees and expenses, incurred by
it in responding to Lender’s requirements for cooperation hereunder.


 


(x)            Insurance.


 


(i)            Borrower,
at its sole cost and expense, shall keep the Improvements and Equipment insured
(including, but not limited to, any period of renovation, alteration and/or
construction) during the term of the Loan with the coverage and in the amounts
required under this Agreement for the mutual benefit of Borrower and Lender
against loss or damage by fire, lightning, wind and such other perils as are
customarily included in a standard “all-risk” or “special cause of loss” form
and against loss or damage by other risks and hazards covered by a standard
extended coverage insurance policy (including, without limitation, fire,
lightning, hail, hurricane, windstorm, tidal wave, explosion, acts of terrorism
certified under the Terrorism Risk Insurance Act of 2002, riot and civil
commotion, vandalism, malicious mischief, strike, water damage, sprinkler
leakage, collapse, burglary, theft, mold and microbial matter coverage arising
as a result of covered perils under the standard “all risk” policy and such other
coverages as may be reasonably required by Lender on the special form (formerly
known as an all risk form)).  Such
insurance shall be in an amount (i) equal to at least the greater of then full
replacement cost of the Improvements and Equipment (exclusive of the cost of
foundations and footings), without deduction for physical depreciation and the
outstanding Principal Indebtedness, and (ii) such that the insurer would not
deem Borrower a co-insurer under said policies.  The policies of insurance carried in accordance with this Section
5.1(x) shall be paid not less than ten (10) days in advance of the due date
thereof and shall contain the “Replacement Cost Endorsement” with a waiver of
depreciation.  If terrorism coverage is
excluded on an “all-risk” basis, then Borrower shall obtain coverage for
terrorism and similar acts in the stand alone terrorism market.  Notwithstanding the foregoing, the terrorism
coverage may exclude non-certified Terrorism Risk Insurance Act of 2002
coverage (i.e. the actions of domestic actors).


 


(ii)           Borrower, at its
sole cost and expense, for the mutual benefit of Borrower and Lender, shall
also obtain and maintain or cause to be obtained and maintained during the
entire term of the Loan the following policies of insurance:


 


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(A)          flood
insurance, if any part of the Mortgaged Property is located in an area
identified by the Federal Emergency Management Agency as an area having special
flood hazards and in which flood insurance has been made available under the
National Flood Insurance Act of 1968, the Flood Disaster Protection Act of 1973
or the National Flood Insurance Reform Act of 1994 (and any amendment or
successor act thereto) in an amount at least equal to the maximum limit of
coverage available with respect to the Improvements and Equipment under said
Act;


 


(B)           Comprehensive
General Liability insurance, including a broad form comprehensive general
liability endorsement and coverage for broad form property damage, contractual
damages, personal injuries (including death resulting therefrom) and a liquor
liability endorsement if liquor is sold on the Mortgaged Property, containing
minimum limits of liability of $1 million for both injury to or death of a
person and for property damage per occurrence and $3 million in the aggregate
for the Mortgaged Property, and such other liability insurance reasonably
requested by Lender; in addition, at least $25 million excess and/or umbrella
liability insurance shall be obtained and maintained for any and all claims,
including all legal liability imposed upon Borrower and all court costs and
attorneys’ fees incurred in connection with the ownership, operation and
maintenance of the Mortgaged Property;


 


(C)           business
interruption insurance (including rental value) in an annual aggregate amount
equal to the estimated income from the Leases of each Mortgaged Property
(including, without limitation, the loss of all Rents and additional Rents
payable by all of the lessees under the Leases (whether or not such Leases are
terminable in the event of a fire or casualty)), such insurance to cover losses
for a period of twelve (12) months after the date of the fire or casualty in
question, plus an extended period of indemnity commencing at the time repairs
are completed for a period of not less than 30 days and to be increased or
decreased, as applicable, from time to time during the term of the Loan if, and
when, the gross revenues from the Leases of the Mortgaged Property materially
increase or decrease, as applicable (including, without limitation, increases
from new Leases and renewal Leases entered into in accordance with the terms of
this Agreement), to reflect all increased Rent and increased additional Rent
payable by all of the lessees under such renewal Leases and all Rent and
additional Rent payable by all of the lessees under such new Leases;


 


(D)          all
risk physical loss and damage coverage with respect to heating and air
conditioning equipment, located in, on, or about the Improvements, except the
coverage required under this clause (ii)(D) shall not be required to be
maintained as a separate policy and may be included as part of the coverages
provided under clause (i);


 


(E)           worker’s
compensation insurance coverage (in amounts not less than the statutory
minimums for all persons employed by Borrower or its tenants at the Mortgaged
Property and in compliance with all other requirements of


 


85

















 


applicable local, state and federal law) and “Employers Liability”
insurance in amounts not less than required by statute;


 


(F)           during
any period of repair or restoration, builder’s “all risk” insurance in an
amount equal to not less than the full insurable value of the Mortgaged
Property against such risks (including, without limitation, fire and extended
coverage and collapse of the Improvements to agreed limits) as Lender may
request, in form and substance acceptable to Lender;


 


(G)           if
reasonably required by Lender with respect to any zoning matter that is reasonably
likely to materially adversely affect the value of any Mortgaged Property,
ordinance or law coverage to compensate for the cost of demolition, increased
cost of construction, and loss to any undamaged portions of the Improvements,
if the current use of the Mortgaged Property or the Improvements themselves are
or become “nonconforming” pursuant to the applicable zoning regulations, unless
full rebuildability following casualty is otherwise permitted under such zoning
regulations notwithstanding such nonconformity;


 


(H)          if
required by Lender as a result of any Mortgaged Property being located in an
area with a high degree of seismic activity, earthquake damage insurance in an
amount and form acceptable to Lender;


 


(I)            such
other insurance as may from time to time be reasonably required by Lender in
order to protect its interests with respect to the Loan and the Mortgaged
Property and to conform such requirements to then current standards for a
Secondary Market Transaction.


 


(iii)          All
policies of insurance (the “Policies”) required pursuant to this Section
5.1(x):


 


(A)          shall
be issued by an insurer approved by Lender which has a claims paying ability
rating of not less than “AA” (or the equivalent) by Rating Agencies
satisfactory to Lender (one of which shall be S&P) and A:XIII or better as
to claims paying ability by AM Best, provided, that notwithstanding the
foregoing, (1) in the event American Modern Insurance shall be the insurer
providing the standard all-risk insurance policy, then such insurer shall not
be required to satisfy such claims paying ability rating by the Rating Agencies
(but will be required to have and maintain a claims paying ability rating by AM
Best of A+:VIII or better), so long as the Borrower delivers to the Lender
evidence reasonably satisfactory to the Lender that the insurer has purchased
reinsurance with respect to not less than 70% of such policy from a reinsurer
with a claims paying ability rating by the Rating Agencies of not less than “A”
(or the equivalent) by Rating Agencies satisfactory to the Lender (one of which
shall be S&P) and (2) the insurer providing the worker’s compensation
insurance coverage shall only be required to maintain a claims paying ability
rating of not less than “A” (or the equivalent) by Rating Agencies satisfactory
to the Lender (one of which shall be S&P),


 


86

















 


(B)           shall
name Lender as an additional insured and contain a standard noncontributory
mortgagee clause and a Lender’s Loss Payable Endorsement, or their equivalents,
naming Lender (and/or such other party as may be designated by Lender) as the
party to which all payments made by such insurance company shall be paid,


 


(C)           shall
be maintained throughout the term of the Loan without cost to Lender,


 


(D)          shall
contain such provisions as Lender deems reasonably necessary or desirable to
protect its interest (including, without limitation, endorsements providing
that neither Borrower, Lender nor any other party shall be a co-insurer under
said Policies and that Lender shall receive at least thirty (30) days prior
written notice of any modification, reduction or cancellation),


 


(E)           shall
contain a waiver of subrogation against Lender,


 


(F)           shall
be for a term of not less than one year,


 


(G)           shall
provide for claims to be made on an occurrence basis,


 


(H)          shall
contain an agreed value clause updated annually (if the amount of coverage
under such policy is based upon the replacement cost of the Mortgaged
Property),


 


(I)            shall
designate Lender as “mortgagee and loss payee” (except general public liability
and excess liability, as to which Lender shall be named as additional insured),


 


(J)            shall
be issued by an insurer licensed in the state in which the Mortgaged Property
is located,


 


(K)          shall
provide that Lender may, but shall not be obligated to, make premium payments
to prevent any cancellation, endorsement, alteration or reissuance, and such
payments shall be accepted by the insurer to prevent same, and


 


(L)           shall
be reasonably satisfactory in form and substance to Lender and reasonably
approved by Lender as to amounts, form, risk coverage, deductibles, loss payees
and insureds to the extent not otherwise specified in this Section 5.1(x).  All property damage insurance policies
(except for flood and earthquake policies) must automatically reinstate after
each loss.


 


Copies of said Policies, certified as true and correct by Borrower, or
insurance certificates thereof, shall be delivered to Lender.  Not later than ten (10) days prior to the
expiration date of each of the Policies, Borrower shall deliver to Lender
satisfactory evidence of the renewal of each Policy.  The insurance coverage required under this Section 5.1(x)
may be effected under a blanket policy or policies covering the Mortgaged
Property and other


 


87

















 


property and assets not constituting a part of the Collateral; provided
that any such blanket policy shall provide at least the same amount and form of
protection as would a separate policy insuring the Mortgaged Property
individually, which amount shall not be less than the amount required pursuant
to this Section 5.1(x) and which shall in any case comply in all other
respects with the requirements of this Section 5.1(x).  Upon demand therefor, Borrower shall
reimburse Lender for all of Lender’s or its designee’s reasonable costs and
expenses incurred in obtaining any or all of the Policies or otherwise causing
the compliance with the terms and provisions of this Section 5.1(x),
including (without limitation) obtaining updated flood hazard certificates and
replacement of any so-called “forced placed” insurance coverages to the extent
Borrower was required to obtain and maintain any such Policy or Policies
hereunder and failed to do so.  Borrower
shall pay the premiums for such Policies (the “Insurance Premiums”) as
the same become due and payable and shall furnish to Lender evidence of the
renewal of each of the Policies with receipts for the payment of the Insurance
Premiums or other evidence of such payment reasonably satisfactory to Lender
(provided, however, that Borrower is not required to furnish such evidence of
payment to Lender in the event that such Insurance Premiums have been paid by
Lender).  If Borrower does not furnish
such evidence and receipts at least ten (10) days prior to the expiration of
any expiring Policy, then Lender may procure, but shall not be obligated to
procure, such insurance and pay the Insurance Premiums therefor, and Borrower
agrees to reimburse Lender for the cost of such Insurance Premiums promptly on
demand.  Within thirty (30) days after
request by Lender, Borrower shall obtain such increases in the amounts of
coverage required hereunder as may be reasonably requested by Lender, based on
then industry-standard amounts of coverage then being obtained by prudent
owners of properties similar to the Mortgaged Property in the same applicable
market region as the Mortgaged Property. 
Borrower shall give Lender prompt written notice if Borrower receives
from any insurer any written notification or threat of any actions or
proceedings regarding the non-compliance or non-conformity of the Mortgaged
Property with any insurance requirements.


 


(iii)          If
the Mortgaged Property shall be damaged or destroyed, in whole or in part, by
fire or other casualty, Borrower shall give prompt notice thereof to Lender.


 


(A)          In
case of loss covered by Policies, Lender may either (a) jointly with a Borrower
settle and adjust any claim and agree with the insurance company or companies
on the amount to be paid on the loss or (b) allow Borrower to agree with the
insurance company or companies on the amount to be paid upon the loss; provided,
that Borrower may settle and adjust losses without participation by Lender
aggregating not in excess of 1% of the Principal Indebtedness, agree with the
insurance company or companies on the amount to be paid upon the loss and
collect and receipt for any such Insurance Proceeds; provided, further,
that if (x) at the time of the settlement of such claim an Event of Default has
occurred and is continuing or (y) Lender and Borrower are unable to agree upon
a joint settlement or (z) Lender disapproves of Borrower’s proposed settlement
with the insurance company, then Lender shall settle and adjust such claim
without the consent of Borrower, and for such purpose is hereby irrevocably
appointed as Borrower’s attorney-in-fact, coupled with an interest.  In


 


88

















 


any such case Lender shall and is hereby authorized to collect and
receipt for any such Insurance Proceeds subject to and to the extent provided
for in this Agreement.  The reasonable
out-of-pocket expenses incurred by Lender in the adjustment and collection of
Insurance Proceeds shall become part of the Indebtedness and be secured by the
Mortgages and shall be reimbursed by Borrower to Lender upon demand therefor.


 


(B)           In
the event of any insured damage to or destruction of the Mortgaged Property or
any part thereof (herein called an “Insured Casualty”) where (1) the aggregate
amount of the loss, as reasonably determined by an Independent insurance
adjuster, is less than thirty percent (30%) of the Lender’s reasonable estimate
of the fair market value of the individual Mortgaged Property affected by the
damage or destruction, (2) in the reasonable judgment of Lender, the Mortgaged
Property can be restored, replaced and/or rebuilt (collectively, the “Restoration”)
by not later than the first to occur of (a) twelve (12) months after the date
of casualty and (b) the expiration of the business interruption insurance and,
in any case, not later than six (6) months prior to the Maturity Date to an
economic unit substantially in the condition it was in immediately prior to the
Insured Casualty and in compliance with all zoning, building and other
applicable Legal Requirements (the “Pre-Existing Condition”) not less
materially valuable (including an assessment of the impact of the termination
of any Leases due to such Insured Casualty) and not less useful than the same
was prior to the Insured Casualty, (3) Lender reasonably determines that the
rental income of the Mortgaged Property, after the Restoration thereof to the
Pre-Existing Condition, will be sufficient to meet all Operating Expenses,
payments for Reserves and payments of principal and interest under the Loan and
satisfy the Debt Service Coverage Test, and (4) tenant leases requiring payment
of annual rent equal to at least seventy-five percent (75%) of the gross
revenues from the Mortgaged Property during the twelve (12) month period
immediately preceding the date of such fire or other casualty remain in full
force and effect during and after the Restoration of the Property (subject to
the rent abatement provisions thereof applicable as a result of the casualty,
so long as such abatement will end, and full rental payments shall resume, upon
substantial completion of the Restoration), or if Lender otherwise elects to
allow a Borrower to restore the Mortgaged Property, then, if no Event of
Default shall have occurred and be continuing, the Insurance Proceeds (after
reimbursement of any reasonable out-of-pocket expenses incurred by Lender in
connection with the collection of any applicable Insurance Proceeds) shall be
made available to reimburse Borrower for the cost of restoring, repairing,
replacing or rebuilding the Mortgaged Property or part thereof subject to the
Insured Casualty, as provided for below. 
Borrower hereby covenants and agrees to commence and diligently to
prosecute such Restoration of the affected Mortgaged Property as nearly as
possible to the Pre-Existing Condition. 
Borrower shall pay all out-of-pocket costs (and if required by Lender,
Borrower shall deposit the total thereof with Lender in advance) of such
Restoration in excess of the Insurance Proceeds made available pursuant to the
terms hereof.


 


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(C)           Except
as provided above, the Insurance Proceeds collected upon any Insured Casualty
shall, at the option of Lender in its sole discretion, be applied to the
payment of the Indebtedness or applied to the cost of Restoration of the
affected Mortgaged Property or part thereof subject to the Insured Casualty, in
the manner set forth below.


 


(D)          Regardless
of whether Insurance Proceeds, if any, are sufficient or are made available to
Borrower for the Restoration of any portion of the affected Mortgaged Property,
Borrower covenants to complete such restoration of the affected Mortgaged
Property to be of at least comparable value as prior to such damage or destruction,
all to be effected in accordance with Legal Requirements and plans and
specifications approved in advance by Lender, such approval not to be
unreasonably withheld or delayed.


 


(E)           In
the event Borrower is entitled to reimbursement out of Insurance Proceeds, such
proceeds shall be held by Lender in the Loss Proceeds Account and disbursed
from time to time as the Restoration progresses upon Lender being furnished
with (1) evidence reasonably satisfactory to it (which evidence may include
inspection(s) of the work performed) that the Restoration covered by the
disbursement has been completed in accordance with plans and specifications
approved by Lender, (2) evidence reasonably satisfactory to it of the estimated
cost of completion of the Restoration, (3) funds, or, at Lender’s option,
assurances reasonably satisfactory to Lender that such funds are available and
sufficient in addition to the Insurance Proceeds to complete the proposed
Restoration, and (4) such architect’s certificates, waivers of lien, contractor’s
sworn statements, title insurance endorsements, bonds and other evidences of
cost, payment and performance of the foregoing Restoration as Lender may
reasonably require and approve.  Lender
may, in any event, require that all plans and specifications for such
Restoration be submitted to and reasonably approved by Lender prior to
commencement of work.  Lender may retain
a construction consultant to inspect such work and review Borrower’s request
for payments and Borrower shall, on demand by Lender, reimburse Lender for the
reasonable fees and disbursements of such consultant.  No payment made prior to the final completion of the Restoration
shall exceed ninety percent (90%) of the hard construction costs value of the
work performed from time to time (except for restoration work on a trade by
trade basis or on an hourly basis for professional services in which event,
payment may be made in full upon the completion of such work).  No funds other than Insurance Proceeds shall
be disbursed prior to disbursement of such proceeds; and, at all times, the
undisbursed balance of such Insurance Proceeds remaining in the Loss Proceeds
Account, together with funds deposited therein to pay the costs of the
Restoration by or on behalf of Borrower, shall be at least sufficient in the
reasonable judgment of Lender to pay for the cost of completion of the
Restoration free and clear of all liens or claims for lien, except for
Permitted Encumbrances.  Any surplus
which may remain out of Insurance Proceeds held by Lender after payment of such
costs of restoration, repair, replacement or rebuilding shall, at the option of
Lender in its sole discretion, be


 


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applied to the payment of the Indebtedness or be paid to Borrower so
long as no Event of Default has occurred and is continuing.


 


(F)           Borrower
shall not carry separate insurance, concurrent in kind or form or contributing
in the event of loss, with any insurance required under this Agreement that
would be considered “co-insurance” or adversely affect the ability to collect
under a policy of insurance required hereunder.


 


(y)           Condemnation.


 


(i)            Borrower
shall promptly give Lender written notice of the actual or threatened
commencement of any proceeding for a Taking and shall deliver to Lender copies
of any and all papers served in connection with such proceedings.  Lender is hereby irrevocably appointed as
Borrower’s attorney-in-fact, coupled with an interest, with exclusive power to
collect, receive and retain any Condemnation Proceeds for said Taking.  With respect to any compromise or settlement
in connection with such proceeding, Lender shall jointly with Borrower
compromise and reach settlement unless at the time of such Taking an Event of
Default has occurred and is continuing and the Indebtedness has been
accelerated, in which event Lender shall compromise and reach settlement
without the consent of Borrower. 
Notwithstanding the foregoing provisions of this Section 5.1(y),
Borrower is authorized to negotiate, compromise and settle, without
participation by Lender, Condemnation Proceeds of up to 1% of the Principal
Indebtedness in connection with any Taking. 
Notwithstanding any Taking, Borrower shall continue to pay the Indebtedness
at the time and in the manner provided for in this Agreement and the other Loan
Documents and the Indebtedness shall not be reduced except in accordance
herewith.


 


(ii)           Borrower shall
cause the Condemnation Proceeds to be paid directly to Lender.  Lender may, in its sole discretion, apply any
such Condemnation Proceeds to the reduction or discharge of the Indebtedness
(whether or not then due and payable).


 


(iii)          With respect to a
Taking in part, which shall mean any Taking which does not render the affected
Mortgaged Property physically or economically unsuitable in the reasonable
judgment of Lender for the use to which it was devoted prior to the Taking,
Borrower shall cause the Condemnation Proceeds to be paid to Lender as
described above, and if Lender does not elect to apply the same to the
Indebtedness as provided in Section 5.1(y)(ii) above, Lender shall
deposit such Condemnation Proceeds in the Loss Proceeds Account and the same
shall be made available for application to the cost of Restoration of the
affected Mortgaged Property and disbursed from time to time as the Restoration
progresses upon Lender being furnished with (1) evidence reasonably
satisfactory to it (which evidence may include inspection(s) of the work
performed) that the Restoration covered by the disbursement has been completed
in accordance with plans and specifications approved by Lender, (2) evidence
reasonably satisfactory to it of the estimated cost of completion of the
Restoration, (3) funds, or, at Lender’s option, assurances satisfactory to
Lender that such funds are available and sufficient in addition to the
Condemnation Proceeds to complete the proposed Restoration, and (4) such
architect’s certificates, waivers of lien, contractor’s sworn statements, title
insurance


 


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endorsements, bonds and other evidences of cost, payment and
performance of the foregoing repair, restoration, replacement or rebuilding as
Lender may reasonably require and approve.


 


(iv)          Regardless of
whether Condemnation Proceeds are made available for such purpose, Borrower
hereby covenants to complete the Restoration of the affected Mortgaged Property
as nearly as possible to the Pre-Existing Condition and to be of at least
comparable value and, to the extent commercially practicable, of substantially
the same character as prior to the Taking, all to be effected in accordance
with applicable law and plans and specifications reasonably approved in advance
by Lender.  Borrower shall pay all costs
(and if required by Lender, Borrower shall deposit the total thereof with
Lender in advance) of such Restoration in excess of the Condemnation Proceeds
made available pursuant to the terms hereof. 
Lender may, in any event, require that all plans and specifications for
such Restoration be submitted to and reasonably approved by Lender prior to
commencement of work.  Lender may retain
a construction consultant to inspect such work and review any request by
Borrower for payments and Borrower shall, on demand by Lender, reimburse Lender
for the reasonable fees and disbursements of such consultant.  No payment made prior to the final
completion of the Restoration shall exceed ninety percent (90%) of the hard
construction costs value of the construction work performed from time to time
(except for restoration work on a trade by trade basis or on an hourly basis
for professional services in which event, payment may be made in full upon the
completion of such work); funds other than Condemnation Proceeds shall be
disbursed prior to disbursement of such proceeds; and at all times, the
undisbursed balance of such proceeds remaining in the hands of Lender, together
with funds deposited for that purpose or irrevocably committed to the repayment
of Lender by or on behalf of Borrower for that purpose, shall be at least sufficient
in the reasonable judgment of Lender to pay for the cost of completion of the
restoration, repair, replacement or rebuilding, free and clear of all liens or
claims for lien.  Any surplus which may
remain out of Condemnation Proceeds held by Lender after payment of such costs
of restoration, repair, replacement or rebuilding shall, at the option of
Lender in its sole discretion, be applied to the payment of the Indebtedness or
be paid to Borrower so long as no Event of Default has occurred and is continuing.


 


(v)           If the affected
Mortgaged Property is sold, through foreclosure or otherwise, prior to the
receipt by Lender of any such Condemnation Proceeds to which it is entitled
hereunder, Lender shall have the right, whether or not a deficiency judgment on
the Note shall have been sought, recovered or denied, to have reserved in any
foreclosure decree a right to receive said award or payment, or a portion
thereof sufficient to pay the Indebtedness. 
In no case shall any such application reduce or postpone any payments
otherwise required pursuant to this Agreement, other than the final payment on
the Note.


 


(z)            Leases and Rents.


 


(i)            Borrower
absolutely and unconditionally assigns to Lender, Borrower’s right, title and
interest in all current and future Leases and Rents as collateral for the Loan,
it being intended by Borrower that this assignment constitutes a present,
absolute


 


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assignment and not an assignment for additional security only.  Such assignment to Lender shall not be
construed to bind Lender to the performance of any of the covenants, conditions
or provisions contained in any such Lease or otherwise impose any obligation
upon Lender.  Borrower shall execute and
deliver to Lender such additional instruments, in form and substance reasonably
satisfactory to Lender, as may hereafter be reasonably requested in writing by
Lender to further evidence and confirm such assignment.  Nevertheless, subject to the terms of this Section
5.1(z), Lender grants to Borrower a license to lease, maintain, operate and
manage the Mortgaged Property and to collect, use and apply the Rents in
accordance with the terms hereof and otherwise act as the landlord under the
Leases, which license shall be deemed automatically revoked upon the occurrence
and during the continuance of an Event of Default under this Agreement.  Any portion of the Rents held by Borrower
shall be held in trust for the benefit of Lender for use in the payment of the
Indebtedness.  Upon the occurrence of an
Event of Default and during the continuance thereof, the license granted to
Borrower herein shall automatically be revoked, and Lender shall immediately be
entitled to possession of all Rents, whether or not Lender enters upon or takes
control of the Mortgaged Property. 
Lender is hereby granted and assigned by Borrower the right, at its
option, upon revocation of the license granted herein, to enter upon the
Mortgaged Property in person, by agent or by court-appointed receiver to
collect the Rents.  Any Rents collected
after the revocation of the license shall be applied toward payment of the
Indebtedness as set forth in Section 2.8 hereof.


 


(ii)           All Leases entered
into by Borrower shall provide for rental rates comparable to then-existing
local market rates and terms and conditions commercially reasonable and
consistent with then-prevailing local market terms and conditions for similar
type properties, and in no event shall Borrower, absent Lender’s prior written
consent, which consent shall not be unreasonably withheld or delayed, enter
into any Leases (a) other than leases of Homesites to owners and occupants of
residential manufactured homes or mobile homes having lease terms not in excess
of two years, and (b) with any Affiliates of Borrower, except as indicated in Schedule
7 attached hereto.  Borrower shall
furnish Lender with (1) detailed term sheets in advance in the case of any
Leases, modifications, amendments or renewals for which Lender’s consent is
required and (2) in the case of any other Leases, executed copies of such
Leases upon written request.  All
renewals or amendments or modifications of Leases that do not satisfy the
requirements of the first sentence of this Section 5.1(z)(ii) shall be
subject to the prior approval of Lender, which approval shall not be
unreasonably withheld or delayed.  All
Leases entered into after the Closing Date with new tenants (i.e. not renewals
of existing tenants as of the Closing Date) shall be written on the standard
lease form for new tenants previously approved by Lender which form as of the
Closing Date is set forth on Schedule 10 attached hereto; provided that
notwithstanding the foregoing, the Borrower may modify any standard lease form
without such approval to the extent necessary to conform such form to any
applicable Legal Requirements (and, upon reasonable request of the Lender, the
Borrower shall notify the Lender in writing with respect to such
modification).  The Borrower shall not
materially change the standard lease form without Lender’s prior written
consent, which consent shall not be unreasonably withheld or delayed, or except
as necessary to comply with applicable Legal Requirements.  Borrower,


 


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(A)          shall
observe and perform all of the material obligations imposed upon the lessor
under the Leases and shall not do or permit to be done anything to materially
impair the value of the Leases as security for the Indebtedness;


 


(B)           shall
not execute any other assignment of lessor’s interest in any of the Leases or
Rents;


 


(C)           shall
enforce all of the material terms, covenants and conditions contained in the
Leases upon the part of the lessee thereunder to be observed or performed and
shall effect a termination or diminution of the obligations of tenants under
leases, only in a manner that a prudent owner of a similar property to the
Mortgaged Property would enforce such terms covenants and conditions or effect
such termination or diminution in the ordinary course of business;


 


(D)          except
as otherwise set forth in the Monthly Statement submitted to Lender, shall not
collect any of the Rents more than one (1) month in advance; and


 


(E)           shall
not convey or transfer or suffer or permit a conveyance or transfer of the
Mortgaged Property or of any interest therein so as to effect a merger of the
estates and rights of, or a termination or diminution of the obligations of,
lessees thereunder.


 


(iii)          Borrower
shall deposit security deposits of lessees which are turned over to or for the
benefit of Borrower or otherwise collected by or on behalf of Borrower, into
the Security Deposit Account and shall not commingle such funds with any other
funds of Borrower.  Any bond or other
instrument which Borrower is permitted to hold in lieu of cash security deposits
under any applicable Legal Requirements shall be maintained in full force and
effect unless replaced by cash deposits as hereinabove described, shall, if
permitted pursuant to Legal Requirements, name Lender as payee or mortgagee
thereunder (or at Lender’s option, be fully assignable to Lender) and shall, in
all respects, comply with any applicable Legal Requirements and otherwise be
reasonably satisfactory to Lender. 
Borrower shall, upon request, provide Lender with evidence reasonably
satisfactory to Lender of Borrower’s compliance with the foregoing.  Upon the occurrence and during the
continuance of any Event of Default, Borrower shall, upon Lender’s request, if
permitted by any applicable Legal Requirements, turn over to Lender the
security deposits (and any interest theretofore earned thereon) with respect to
all or any portion of the Mortgaged Property, to be held by Lender subject to
the terms of the Leases.


 


(aa)         Maintenance of
Mortgaged Property.  Borrower shall
cause the Mortgaged Property to be maintained in a good and safe condition and
repair, subject to wear and tear and damage caused by casualty or
condemnation.  The Improvements and the
Equipment shall not be removed, demolished or altered (except for (1) normal
replacement of the Equipment, (2) Improvements contemplated in an approved
Operating Budget or pursuant to Leases in effect from time to time, (3)
removals, demolition or alterations that do not cost more than 1% of the
Principal Indebtedness or (4) an emergency which the Borrower shall have
notified the Lender of


 


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in writing, including the action taken to
remediate) without the consent of Lender which consent shall not be
unreasonably withheld or delayed. 
Except with respect to an Insured Casualty which shall be governed by
the terms and conditions provided herein, Borrower shall, or shall cause any
tenants obligated under their respective Leases to, promptly repair, replace or
rebuild any part of the Mortgaged Property that becomes damaged, worn or
dilapidated.  Borrower shall complete
and pay for any structure at any time in the process of construction or repair
on the Land.  Borrower shall not initiate,
join in, or consent to any change in any private restrictive covenant, zoning
law or other public or private restriction, limiting or defining the uses which
may be made of any Mortgaged Property or any part thereof without the written
consent of Lender, which consent shall not be unreasonably withheld or delayed.  If under applicable zoning provisions the
use of all or any portion of the Mortgaged Property is or shall become a
nonconforming use, Borrower will not cause or permit such nonconforming use to
be discontinued or abandoned if such discontinuance of abandonment would cause
such nonconforming use to no longer be permitted without the express written
consent of Lender, which consent shall not be unreasonably withheld or
delayed.  Borrower shall not (i) change
the use of any of the Land or Improvements in any material respect, (ii) permit
or suffer to occur any waste on or to any Mortgaged Property or to any portion
thereof or (iii) take any steps whatsoever to convert any Mortgaged Property,
or any portion thereof, to a condominium or cooperative form of management.


 


(bb)         Prohibited
Persons.  Borrower covenants and agrees
to deliver (from time to time) to Lender any certification or other evidence as
may be requested by Lender in its sole and absolute discretion, confirming
that: (i) neither Borrower, Member, General Partner, Guarantor nor their
respective officers, directors, partners, members or majority-owned Affiliates
is a Prohibited Person; and (ii) neither Borrower, Member, General Partner,
Guarantor nor their respective officers, directors, partners, members or majority-owned
Affiliates has engaged in any business, transaction or dealings with a Person
known to Borrower to be a Prohibited Person, including, but not limited to, the
making or receiving of any contribution of funds, goods, or services, to or for
the benefit of a Person known to Borrower to be a Prohibited Person.


 


ARTICLE VI.

NEGATIVE COVENANTS


 


Section 6.1.            Negative
Covenants.  Borrower covenants and
agrees that, until payment in full of the Indebtedness, it will not do,
directly or indirectly, any of the following unless Lender consents thereto in
writing:


 


(a)           Liens on the
Mortgaged Property.  Incur, create,
assume, become or be liable in any manner with respect to, or permit to exist,
except as permitted by Section 5.1(b) above, any Lien with respect to any
Mortgaged Property or any portion thereof, except: (i) Liens in favor of Lender
and (ii) the Permitted Encumbrances.


 


(b)           Ownership and
Transfer.  Except as expressly
permitted by or pursuant to this Agreement or the other Loan Documents, own any
property of any kind other than the Mortgaged Property, or Transfer any
Mortgaged Property or any portion thereof.


 


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(c)           Other Borrowings.  Incur, create, assume, become or be liable
in any manner with respect to Other Borrowings.


 


(d)           Dissolution;
Merger or Consolidation.  Dissolve,
terminate, liquidate, merge with or consolidate into another Person.


 


(e)           Change In
Business.  Make any material change
in the scope or nature of its business objectives, purposes or operations, or
undertake or participate in activities other than the continuance of its
present business.


 


(f)            Debt
Cancellation.  Cancel or otherwise
forgive or release any material claim or debt owed to Borrower by any Person,
except for adequate consideration or in the ordinary course of Borrower’s
business.


 


(g)           Affiliate
Transactions.  Except for fees
payable to Manager under the Management Agreement, (i) pay any management,
consulting, director or similar fees to any Affiliate of Borrower or to any director
or manager (other than any customary fees of the Independent Manager), officer
or employee of Borrower, (ii) directly or indirectly enter into or permit to
exist any transaction (including the purchase, sale, lease or exchange of any
property or the rendering of any service) with any Affiliate of Borrower or
with any director, officer or employee of any Affiliate of Borrower, except
transactions in the ordinary course of and pursuant to the reasonable
requirements of the business of Borrower and upon fair and reasonable terms
which are no less favorable to Borrower than would be obtained in a comparable
arm’s length transaction with a Person that is not an Affiliate of Borrower, or
(iii) make any payment or permit any payment to be made to any Affiliate of
Borrower when or as to any time when any Event of Default shall exist.


 


(h)           Creation of
Easements.  Except as expressly
permitted by or pursuant to the Mortgages or this Agreement, create, or permit
any Mortgaged Property or any part thereof to become subject to, any easement,
license or restrictive covenant, other than a Permitted Encumbrance, provided,
that the consent of Lender shall not be unreasonably withheld or delayed to the
extent that any such easement, license or restrictive covenant is reasonably
necessary for the continued use, enjoyment, access to or operation of the
applicable Mortgaged Property.


 


(i)            Misapplication
of Funds.  Distribute any Rents or
Moneys received from Accounts in violation of the provisions of Section 2.12,
or fail to pledge any security deposit to Lender, or misappropriate any
security deposit or portion thereof.


 


(j)            Certain
Restrictions.  Amend, modify or
waive any of its rights under the Master Homesite Lease Documentation, provided
that Borrower shall, not less frequently than once each six months, enter into
amendments contemplated under paragraph 1 of the Master Homesite Lease, in form
reasonably satisfactory to Lender and provide the same to Lender.  Borrower shall enforce its rights under the
Master Homesite Lease Documentation in a commercially reasonably manner,
including its right to collect and retain additional Master Lease Deposits from
time to time as provided in the Master Lease, which Borrower shall promptly
deposit into the Master Lease Deposit Account.


 


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(k)           Assignment of
Licenses and Permits.  Assign or
transfer any of its interest in any Permits pertaining to any Mortgaged
Property, or assign, transfer or remove or permit any other Person to assign,
transfer or remove any records pertaining to any Mortgaged Property.


 


(l)            Place of
Organization.  Change its
jurisdiction of organization, creation or formation, as applicable, without
giving Lender at least fifteen (15) days’ prior written notice thereof and
promptly providing Lender such information as Lender may reasonably request in
connection therewith.


 


(m)          Leases.  Enter into, amend or cancel Leases, except
as permitted by this Agreement.


 


(n)           Management
Agreement.  Except in accordance
with this Agreement, (i) terminate or cancel the Management Agreement, (ii)
consent to either the reduction of the term of or the assignment of the
Management Agreement, (iii) increase or consent to the increase of the amount
of any charges under the Management Agreement, or (iv) otherwise modify,
change, supplement, alter or amend, or waive or release any of its rights and
remedies under, the Management Agreement in any material respect.


 


(o)           Plans and Welfare
Plans.  Knowingly engage in or
permit any transaction in connection with which Borrower or any ERISA Affiliate
could be subject to either a material civil penalty or tax assessed pursuant to
Section 502(i) or 502(1) of ERISA or Section 4975 of the Code, permit any
Welfare Plan to provide benefits, including without limitation, medical
benefits (whether or not insured), with respect to any current or former
employee of Borrower beyond his or her retirement or other termination of
service other than (i) coverage mandated by applicable law, (ii) death or
disability benefits that have been fully provided for by paid up insurance or
otherwise or (iii) severance benefits (unless such coverage is provided after
notification of and with the reasonable approval of Lender or pursuant to an
employment or severance agreement entered into in the ordinary course of
business consistent with past practice), permit the assets of Borrower to
become “plan assets”, whether by operation of law or under regulations
promulgated under ERISA or adopt, amend (except as may be required by applicable
law) or materially increase the amount of any benefit or amount payable under,
or permit any ERISA Affiliate to adopt, amend (except as may be required by
applicable law) or materially increase the amount of any benefit or amount
payable under, any Plan or Welfare Plan, except for normal increases in the
ordinary course of business consistent with past practice that, in the
aggregate, do not result in a material increase in benefits expense to Borrower
or any ERISA Affiliate.


 


(p)           Transfer of Ownership
Interests.  Permit any Transfer of a
direct or indirect ownership interest or voting right in Borrower (other than a
Permitted Transfer).


 


(q)           Equipment and
Inventory.  Except pursuant to the
Management Agreement, permit any Equipment owned by Borrower to be removed at
any time from any Mortgaged Property unless the removed item is consumed or
sold in the usual and customary course of business, removed temporarily for
maintenance and repair or, if removed permanently, replaced by an article of
equivalent suitability and not materially less value, owned by Borrower free
and clear of any Lien (other than Permitted Encumbrances).


 


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(r)            Management Fees.  Pay Borrower or any Affiliate of Borrower
any management fees with respect to the Mortgaged Property except for
management fees paid to Manager under the Management Agreement.


 


(s)           Prohibited
Persons.  With respect to Borrower,
Member, General Partner, Guarantor and any of their respective officers, directors,
partners, members or majority-owned Affiliates: (i) conduct any business, or
engage in any transaction or dealing, with any Person known to Borrower to be a
Prohibited Person, including, but not limited to, the making or receiving of
any contribution of funds, goods, or services, to or for the benefit of a
Prohibited Person; or (ii) engage in or conspire to engage in any transaction
that evades or avoids, or has the purpose of evading or avoiding, or attempts
to violate, any of the prohibitions set forth in EO13224.


 


ARTICLE VII.

EVENT OF DEFAULT


 


Section 7.1.            Event
of Default.  The occurrence of one
or more of the following events shall be an “Event of Default”
hereunder:


 


(a)           if on any Payment
Date Borrower fails to pay any Monthly Debt Service Payment due and payable on
such Payment Date, or if Borrower fails to make any scheduled deposits into the
Reserve Accounts when due and payable in accordance with the provisions hereof;


 


(b)           if Borrower fails to
pay the outstanding Indebtedness on the Maturity Date;


 


(c)           if Borrower fails to
pay or deposit any other amount payable or required to be deposited pursuant to
this Agreement or any other Loan Document when due and payable in accordance
with the provisions hereof or thereof, as the case may be, and such failure
continues for ten (10) days after Lender delivers written notice thereof to
Borrower (other than the failure of the Lender to transfer available funds from
the Collection Account to a Reserve Account pursuant to Section 2.12(b);


 


(d)           if any representation
or warranty made herein or in any other Loan Document, or in any report,
certificate, financial statement or other Instrument, agreement or document
furnished by Borrower, Member or Guarantor in connection with this Agreement,
the Note or any other Loan Document shall be false or materially misleading as
of the date such representation or warranty was made (or if such representation
or warranty relates to an earlier date, then as of such earlier date);


 


(e)           if Borrower or the
Guarantor makes an assignment for the benefit of creditors;


 


(f)            if a receiver,
liquidator or trustee shall be appointed for Borrower or the Guarantor or if
Borrower or the Guarantor shall be adjudicated a bankrupt or insolvent, or if
any petition for bankruptcy, reorganization or arrangement pursuant to federal
bankruptcy law, or any similar federal or state law, shall be filed by or
against, consented to, or acquiesced in by,


 


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Borrower or the Guarantor, or if any
proceeding for the dissolution or liquidation of Borrower or the Guarantor
shall be instituted; provided, however, that if such appointment,
adjudication, petition or proceeding was involuntary and not consented to by
Borrower or the Guarantor, upon the same not being discharged, stayed or
dismissed within ninety (90) days, or if Borrower or the Guarantor shall
generally not be paying its debts as they become due;


 


(g)           if Borrower attempts
to delegate its obligations or assign its rights under this Agreement, any of the
other Loan Documents or any interest herein or therein, or if any Transfer of
any Mortgaged Property or any interest therein occurs, or any direct or
indirect Transfer of any direct or indirect ownership interest in Borrower
occurs, other than in accordance with or as permitted under this Agreement;


 


(h)           if any breach or
failure to perform any of the covenants in Article VI hereof shall occur, which
breach or failure to perform, in the case of Section 6.1(o) or (q)
only, shall remain uncured for a period of thirty (30) days after the
occurrence of such breach or failure to perform or if any material breach or
failure to perform any of the covenants in Article VIII hereof shall occur;


 


(i)            if an Event of
Default as defined or described in the Note or any other Loan Document occurs,
whether as to Borrower or the Mortgaged Property or any portion thereof;


 


(j)            if any of the
assumptions made with respect to Borrower and its Affiliates in that certain
substantive non-consolidation opinion letter dated as of February
    , 2004 delivered by Holme Roberts & Owen LLP in
connection with the Loan is not true and correct in all respects;


 


(k)           if Borrower fails to
maintain any insurance required to be maintained pursuant to Section 5.1(x)
hereof; and


 


(l)            if Borrower shall
fail to perform any of the terms, covenants or conditions of this Agreement,
the Note, the Mortgages or the other Loan Documents, other than as specifically
otherwise referred to above in this definition of “Event of Default,” for ten
(10) days after notice to Borrower from Lender or its successors or assigns, in
the case of any Default which can be cured by the payment of a sum of money, or
for thirty (30) days after notice from Lender or its successors or assigns, in
the case of any other Default (unless a longer notice period is otherwise
provided herein or in such other Loan Document); provided, however,
that if such non-monetary Default is susceptible of cure but cannot reasonably
be cured within such thirty (30) day period and such Borrower shall have
commenced to cure such Default within such thirty (30) day period and
thereafter diligently and expeditiously proceeds to cure the same, such thirty
(30) day period shall be extended for an additional thirty (30) days;


 


then, upon the occurrence of any such Event of Default and at any time
thereafter, Lender or its successors or assigns, may, in addition to any other
rights or remedies available to it pursuant to this Agreement and the other
Loan Documents or at law or in equity, take such action, without further notice
or demand, as Lender or its successors or assigns, deems advisable to protect
and enforce its rights against Borrower and in and to all or any portion of the
Collateral, and may


 


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enforce or avail itself of any
or all rights or remedies provided in the Loan Documents against Borrower
and/or the Collateral (including, without limitation, all rights or remedies
available at law or in equity).  In addition
to and without limiting the foregoing, upon the occurrence of any Event of
Default described in any of Sections 7.1(e), (f), or (g), the unpaid principal
amount of and accrued interest and fees on the Loan and all other Indebtedness
shall automatically become immediately due and payable, without presentment,
demand, protest, notice of intent to accelerate, notice of acceleration or
other requirements of any kind, all of which are hereby expressly waived by
Borrower.  Upon and at any time after
the occurrence of any other Event of Default, at the option of Lender, which
may be exercised without notice or demand to anyone, all or any portion of the
Loan and other Indebtedness shall immediately become due and payable.


 


Section 7.2.            Remedies.


 


(a)           Upon the occurrence
of an Event of Default, all or any one or more of the rights, powers, other
remedies available to Lender against Borrower under this Agreement or any of
the other Loan Documents executed by or with respect to Borrower, or at law or
in equity may be exercised by Lender at any time and from time to time, whether
or not all or any portion of the Indebtedness shall be declared due and
payable, and whether or not Lender shall have commenced any foreclosure
proceeding or other action for the enforcement of its rights and remedies under
any of the Loan Documents with respect to all or any portion of the
Collateral.  Any such actions taken by
Lender shall be cumulative and concurrent and may be pursued independently,
singly, successively, together or otherwise, at such time and in such order as
Lender may determine in its sole discretion, to the fullest extent permitted by
law, without impairing or otherwise affecting the other rights and remedies of
Lender permitted by law, equity or contract or as set forth herein or in the
other Loan Documents.


 


(b)           In the event of the
foreclosure or other action by Lender to enforce Lender’s remedies in
connection with all or any portion of the Collateral, Lender shall apply all
Net Proceeds received to repay the Indebtedness in accordance with Section
2.8, the Indebtedness shall be reduced to the extent of such Net Proceeds
and the remaining portion of the Indebtedness shall remain outstanding and
secured by the Loan Documents, it being understood and agreed by Borrower that
Borrower is liable for the repayment of all the Indebtedness; provided, however,
that the Loan shall be deemed to have been repaid only to the extent of the Net
Proceeds actually received by Lender with respect to the Collateral and applied
in reduction of the Indebtedness evidenced by the Note in accordance with the
provisions of this Agreement, after payment by Borrower of all Transaction
Costs and costs of enforcement.


 


(c)           Upon and during the
continuation of an Event of Default, Lender shall have the right, but not the
obligation, with respect to any and all bankruptcy proceedings that are now or
hereafter commenced in connection with the Mortgaged Property, to (i) vote to
accept or reject any plans of reorganization, (ii) vote in any election of a
trustee, (iii) elect the treatment of secured claims as specified in Section
1111(b) of the Bankruptcy Code, and (iv) make any other decisions requested
of holders of claims or interests that Borrower would have had the right to do
in such bankruptcy proceedings in the absence of an Event of Default.


 


Section 7.3.            Remedies
Cumulative.  The rights, powers and
remedies of Lender under this Agreement shall be cumulative and not exclusive
of any other right, power or remedy


 


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which Lender may have against Borrower
pursuant to this Agreement or the other Loan Documents executed by or with
respect to Borrower, or existing at law or in equity or otherwise.  Lender’s rights, powers and remedies may be
pursued singly, concurrently or otherwise, at such time and in such order as
Lender may determine in Lender’s sole discretion.  No delay or omission to exercise any remedy, right or power
accruing upon an Event of Default shall impair any such remedy, right or power
or shall be construed as a waiver thereof, but any such remedy, right or power
may be exercised from time to time and as often as may be deemed
expedient.  A waiver of any Default or
Event of Default shall not be construed to be a waiver of any subsequent
Default or Event of Default or to impair any remedy, right or power consequent
thereon.  Notwithstanding any other
provision of this Agreement, Lender reserves the right to seek a deficiency
judgment or preserve a deficiency claim, in connection with the foreclosure of
any Mortgage on the Mortgaged Property, to the extent necessary to foreclose on
other parts of the Collateral.


 


Section 7.4.            Intentionally
Omitted.


 


Section 7.5.            Curative
Advances.  If any Event of Default
occurs and is not cured by Borrower after notice from Lender, then Lender may
expend such sums as either shall reasonably deem appropriate to cure or attempt
to cure such Event of Default.  Borrower
shall immediately repay all such sums so advanced, which sums shall immediately
become part of the Indebtedness, bear interest at the Default Rate from the
date advanced until the date repaid, and be secured by all Collateral.


 


ARTICLE VIII.

SINGLE-PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS,

WARRANTIES AND COVENANTS


 


Section 8.1.            Applicable
to Borrower.  Borrower hereby
acknowledges that, as a condition of Lender’s agreements and performance of its
obligations hereunder, Lender is relying on the status of Borrower as a legal
entity separate and apart from any Affiliate or other entity and has required
that Borrower maintain such status, and Lender hereby acknowledges such
reliance and requirement.  Accordingly,
Borrower hereby represents, warrants and covenants as of the Closing Date and
until such time as the Loan is paid in full, that absent express advance
written waiver from Lender, which may be withheld the Lender’s sole discretion,
Borrower:


 


(a)           was and will be
organized solely for purpose of owning and operating the Mortgaged Property;


 


(b)           has not owned, does
not own and will not own any assets other than the Mortgaged Property (including
incidental personal property necessary for the operation thereof and proceeds
therefrom);


 


(c)           was not engaged, is
not engaged and will not engage in any business, directly or indirectly, other
than the ownership, management and operation of the Mortgaged Property;


 


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(d)           has not entered into
and will not enter into any contract or agreement with any partner, member,
shareholder, trustee, beneficiary, principal, joint venturer or Affiliate of
Borrower except in the ordinary course of its business pursuant to written
agreements upon terms and conditions that are intrinsically fair and
substantially similar to those that would be available on an arms-length basis
with third parties other than such Affiliate;


 


(e)           has not incurred and
will not incur any debt, secured or unsecured, direct or contingent (including
guaranteeing any obligation), other than (i) the Loan and (ii) trade payables
incurred in the ordinary course of business with trade creditors in connection
with owning, operating and maintaining the Mortgaged Property, in such amounts
as are normal and reasonable under the circumstances, provided such debt is not
evidenced by a promissory note or other security instrument and is not at any time
in an aggregate amount in excess of two percent (2%) of the Principal
Indebtedness, and further provided that all such trade debts are paid within
sixty (60) days after the same are incurred (excluding therefrom any equipment
financing paid within sixty (60) days after the same are incurred) and trade
payables being disputed or contested in good faith by the Borrower and in the
same manner and with the same deposits as Lien Claims set forth in Section
5.1(b)(ii) of this Agreement;)


 


(f)            has not made and will
not make any loan or advances to any Person (including any of its Affiliates),
or pledge its assets for the benefit of any other Person, or seek or obtain
credit or incur any obligation to any third party based upon the assets of any
other Person, or induce any third party to rely on the creditworthiness of any
other Person;


 


(g)           has remained and as
of the Closing Date reasonably expects to remain, solvent, and has maintained,
and as of the Closing Date reasonably expects to maintain adequate capital for
the normal obligations reasonably foreseeable in a business of its size and
character and in light of its contemplated business operations;


 


(h)           has not acquired and
will not acquire obligations or securities of any Person;


 


(i)            has not failed and
will not fail to correct any known misunderstanding or misrepresentation
regarding its separate identity;


 


(j)            has done or caused
to be done and will do all things necessary to preserve its existence;


 


(k)           shall continuously
maintain its existence and good standing and be qualified to do business in all
states necessary to carry on its business, including the state in which the
Mortgaged Property is located;


 


(l)            has conducted and
operated and will conduct and operate its business solely in its own name, with
all oral and written communications from Borrower, including, without
limitation, correspondence, invoices, purchase orders, billing statements,
applications and business forms, made solely in the name of Borrower;


 


(m)          has accurately
maintained and will continue to accurately maintain books, records, bank
accounts, accounting records, financial statements and other entity documents


 


102

















 


separate from those of its partners, members,
shareholders, trustees, beneficiaries, principals, Affiliates, and any other
Person, with such accounting records and financial statements having been
prepared and kept in accordance with reasonable accounting practices applied on
a consistent basis, and such financial statements of Borrower shall be prepared
in a manner that indicates (through appropriate footnotes if necessary) the
existence of Borrower and its assets and liabilities separate and apart from
any other Person; moreover, Borrower shall indicate in its financial statements
that the assets of Borrower are not available to satisfy the claims of
creditors of any Affiliate of Borrower and that the assets of any Affiliate of
Borrower are not available to satisfy the claims of creditors of Borrower and,
except with appropriate designation as set forth above, Borrower shall not
authorize its assets or liabilities to be listed on the financial statement of
any other Person;


 


(n)           has been and will
be, and at all times has held and will hold itself out to the public as, a
legal entity separate and distinct from any other Person (including any of its
partners, members, shareholders, trustees, beneficiaries, principals and
Affiliates, and any Affiliates of any of the same), and not as a department or
division of any Person;


 


(o)           has and will file
such tax returns with respect to itself as may be required under applicable law
and has prepared and will prepare separate tax returns and financial
statements, or if part of a consolidated group, is shown as a separate member
of such group;


 


(p)           has paid and shall
pay its own liabilities, indebtedness, and obligations of any kind, as the same
shall become due, from its own separate assets, rather than from those of other
Persons, and Borrower shall not consent to any Person operating the Mortgaged
Property to incur expenses as agent or on behalf of Borrower, unless such
Person agrees, prior to incurring such expense, to clearly indicate that such
expenses are the sole responsibility of, and any payment will come from,
Borrower;


 


(q)           has not and will not
enter into any transaction of merger or consolidation, or acquire by purchase
or otherwise all or substantially all of the business or assets of, or any
stock or beneficial ownership of, any Person;


 


(r)            has not commingled
and will not commingle or permit to be commingled its funds or other assets
with those of any other Person; and has held and will hold title to all of its
real and personal property in its own name and not in the name of any other
Person;


 


(s)           has maintained and
will maintain its assets in such a manner that it is not costly or difficult to
segregate, ascertain or identify its individual assets from those of any other
Person;


 


(t)            has not, does not
and will not hold itself out to be responsible for the debts or obligations of
any other Person and, except for the Loan Documents to which other Persons are
party, shall not consent to any other Person holding itself out as being
responsible for the debts or obligations of Borrower;


 


(u)           has not and will not
assume, guarantee or otherwise become liable on or in connection with any
obligation of any other Person and, except for the Loan Documents to which


 


103

















 


other Persons are party, shall not consent to
any other Person guaranteeing, assuming or otherwise becoming liable for any
obligation of Borrower;


 


(v)           except for funds
deposited into the Local Collection Account, the Collection Account or the
Reserve Accounts in accordance with the Loan Documents, has not and shall not
hold title to its assets other than in its name;


 


(w)          complies and shall at
all times hereafter comply with all of the assumptions, statements,
certifications, representations, warranties and covenants regarding or made by
it contained in or appended to the nonconsolidation opinion delivered pursuant
hereto;


 


(x)            has paid and will
pay its own liabilities and expenses, out of its own funds and shall not
consent to any other Person paying Borrower’s obligations except to the extent
that timely reimbursement is made for the same;


 


(y)           has held and will
hold regular meetings, as appropriate to conduct its business and has observed
at all times and will observe all limited liability company formalities and
record keeping;


 


(z)            has allocated and
will allocate to Borrower reasonably and on the basis of fair market value
determined on an arms-length basis all general overhead and administrative
expenses, including all costs associated with common employees and shared
office space, any such allocation shall be specifically and reasonably
documented and substantiated, any such allocation of expenses to Borrower shall
be paid solely by Borrower from Borrower’s own funds, and Borrower shall at all
times use separate stationary, letterhead, invoices and checks;


 


(aa)         has not and will not
identify its members or partners, Independent Manager (as defined below) or any
other member or partner of any Affiliate of Borrower, or any other Person, as a
division or part of it;


 


(bb)         has paid and will pay
the salaries of its own employees and has maintained and will maintain a
sufficient number of employees in light of its contemplated business
operations;


 


(cc)         has maintained,
currently maintains, and will continue to maintain, its own cash, cash
positions and bank accounts separate from any other Person;


 


(dd)         shall not (i)
liquidate or dissolve, in whole or in part; (ii) consolidate, merge or enter
into any form of consolidation with or into any other Person, nor convey,
transfer or lease its assets substantially as an entirety to any Person nor
permit any Person to consolidate, merge or enter into any form of consolidation
with or into itself, nor convey, transfer or lease its assets substantially as
an entirety to any Person; (iii) engage in any business other than the
ownership and operation of the Mortgaged Property; or (iv) amend any provisions
of its organizational documents containing provisions similar to those
contained in this Article VIII;


 


(ee)         is a limited
liability company duly formed and existing under the laws of the State of Delaware
with one (1) equity member (the “Single Member”) in addition to the
Independent Manager, whose limited liability company agreement (the “Borrower


 


104

















 


Organizational Documents”)
contains each of the representations, covenants and warranties set forth in
this Article VIII and requires Borrower to at all times cause there to
be at least one (1) duly appointed independent director or independent manager,
as applicable, who is a natural person and also a non-economic member of
Borrower (each, an “Independent Director/Manager”) whose affirmative
vote will be required in order for a voluntary filing for protection under the
Bankruptcy Code or similar action by Borrower and who is not at the time of
such individual’s initial appointment as Independent Director/Manager, shall
not be during such individual’s tenure as Independent Director/Manager, and may
not have been at any time during the preceding five years, (i) a shareholder,
member or partner of, or an officer, manager, director, except in his or her
capacity as Independent Director/Manager of Borrower, paid consultant or
employee of, customer of or supplier to or a member of the immediate family of
Borrower (except in his or her capacity as Independent Director/Manager of
Borrower) or any of its shareholders, members, partners, subsidiaries or
affiliates or (ii) any person or other entity controlling or under common
control with any such shareholder, member, partner, officer, manager, director,
employee, supplier or customer or any member of the immediate family of any of
them; provided, however, that the foregoing limitations on the
use of persons who are Affiliates of Borrower as Independent Director/Manager
shall not apply to Borrower’s use of natural persons employed by CT Corporation
or any reputable, national service similar to CT Corporation and reasonably
approved by Lender to fill the position of Independent Director/ Manager
required hereunder, notwithstanding that such persons may also act as independent
directors of such Affiliates of Borrower, so long as such Independent
Director/Manager does not derive more than 5% of his/her annual income from
serving as director/manager of Affiliates of Borrower.  As used herein, the term “control”
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a person or entity, whether
through ownership of voting securities, by contract or otherwise;


 


(ff)           has complied and
will comply with the separateness provisions of the Organizational Documents
since such Organizational Documents were executed and delivered, and with the
laws of the state of its formation relating to limited liability companies;


 


(gg)         with respect to any
entity comprising the Borrower that is a limited liability company, the
Organizational Documents provide and shall at all times continue to provide
that upon the occurrence of any event that causes the Single Member to cease to
be a member of Borrower, the Independent Director/Manager shall, without action
of any person and simultaneously with the Single Member ceasing to be a member
of Borrower, automatically continue as a member of such Borrower and shall
continue Borrower without dissolution;


 


(hh)         with respect to any
entity comprising the Borrower that is a limited liability company, Borrower
shall cause reputable Delaware counsel acceptable to Lender (the “Delaware
Law Firm”) to deliver to Lender an opinion letter reasonably satisfactory
to Lender, whereby the Delaware Law Firm opines (which opinion may be subject
to standard assumptions, qualifications, limitations and exceptions acceptable
to Lender), among other requirements of Lender, that: (1) the unanimous consent
of the Single Member and the Independent Manager is required in order for the
applicable Borrower to file a voluntary bankruptcy petition; (2) the provision
in Organizational Documents that requires unanimous consent as a condition to
filing a voluntary bankruptcy petition is enforceable against the Single Member;
(3) the bankruptcy, dissolution, liquidation or death of the Single Member will
not cause the applicable Borrower to


 


105

















 


be dissolved; (4) no creditor of the Single
Member shall have the right to obtain possession of, or otherwise exercise
legal or equitable remedies with respect to, the applicable Borrower’s
property; and (5) Delaware law, not federal law, governs the determination of
what persons or entities have the authority to file a voluntary bankruptcy
petition on behalf of the applicable Borrower;


 


(ii)           the Organizational
Documents provide and shall at all times continue to provide that Borrower
shall not cause, permit, or empower the Single Member, manager, or any other
person to consolidate or merge Borrower into any other entity, or, without the
affirmative vote and express written authorization of all members or partners
of Borrower and the Independent Director/Manager, to institute proceedings to
have Borrower adjudicated bankrupt or insolvent, or consent to the institution
of bankruptcy or insolvency proceedings against Borrower or file a petition
seeking or consent to, reorganization or relief with respect to Borrower under
any applicable federal or state law relating to bankruptcy, or consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or
other similar official) of Borrower or a substantial part of Borrower’s
property, or make any assignment for the benefit of creditors of Borrower, or
admit in writing Borrower’s inability to pay its debts generally as they become
due, or take action in furtherance of any such action; and


 


(jj)           the Borrower
Organizational Documents provide and shall at all times continue to provide (i)
that Borrower shall at all times maintain an arms-length relationship with any
Affiliates of Borrower, (ii) that Borrower shall at all times maintain
independent management over its daily business affairs, free from any control
exercised by any Affiliate of Borrower, and (iii) that to the extent that
control of Borrower is exercised by any manager, and the same individual acts
as manager or similar control person with respect to any Affiliate of Borrower,
such individual will act in accordance with the separateness requirements of
the Loan Documents and Borrower Organizational Documents, including, without
limitation (A) an express requirement under the Borrower Organizational
Documents that the manager of Borrower make all decisions regarding the
business of Borrower independent of, and not dictated by, any Affiliate of the
Borrower, and (B) the provisions of the Loan Documents and the Borrower
Organizational Documents relating to transactions with Affiliates of Borrower
and conflicts of interest.


 


ARTICLE IX.

MISCELLANEOUS


 


Section 9.1.            Survival.  This Agreement and all covenants,
agreements, representations and warranties made herein and in the certificates
delivered pursuant hereto shall survive the execution and delivery of this
Agreement, the making the Loan hereunder and the execution and delivery by
Borrower to Lender of the Loan Documents, and shall continue in full force and
effect so long as any portion of the Indebtedness is outstanding and
unpaid.  Whenever in this Agreement any
of the parties hereto is referred to, such reference shall be deemed to include
the successors and assigns of such party. 
All covenants, promises and agreements in this Agreement contained, by
or on behalf of Borrower, shall inure to the benefit of the respective
successors and assigns of Lender. 
Nothing in this Agreement or in any other Loan Document, express or
implied, shall give to any Person other than the parties and the holder of the
Note and


 


106

















 


the other Loan Documents, and their legal
representatives, successors and assigns, any benefit or any legal or equitable
right, remedy or claim hereunder.


 


Section 9.2.            Lender’s
Discretion.  Whenever pursuant to
this Agreement, Lender exercises any right given to it to approve or
disapprove, or any arrangement or term is to be satisfactory to Lender, the
decision of Lender to approve or disapprove or to decide whether arrangements
or terms are satisfactory or not satisfactory shall (except as is otherwise
specifically herein provided) be in the sole discretion of Lender and shall be
final and conclusive.


 


Section 9.3.            Governing
Law.


 


This Agreement was negotiated in New York and made by Lender and
accepted by Borrower in the State of New York, and the proceeds of the Note
delivered pursuant hereto were disbursed from New York, which State the parties
agree has a substantial relationship to the parties and to the underlying
transaction embodied hereby, and in all respects (including, without
limitation, matters of construction, validity, performance, and maximum permissible
rates of interest), this Agreement and the obligations arising hereunder shall
be governed by, and construed in accordance with, the laws of the State of New
York applicable to contracts made and performed in such State and any
applicable law of the United States of America, except that at all times the
provisions for the creation, perfection and enforcement of the liens and
security interests created pursuant to each Mortgage and Assignment of Rents
and Leases shall be governed by the laws of each State where the related
Mortgaged Property is located, except that the security interests in Account
Collateral shall be governed by the laws of the State of New York or the State
where the Account Collateral is held, at the option of Lender..


 


(a)           Borrower hereby
consents to the jurisdiction of any federal court or state court in New York,
New York or within the county and state in which any Mortgaged Property is
located and irrevocably agrees that, subject to Lender’s election, any legal
suit, action or proceeding against Lender or Borrower arising out of or
relating to this Agreement or the other Loan Documents may be instituted and
litigated in such courts.  Borrower
hereby (i) irrevocably waives, to the fullest extent permitted by applicable
law, any objection which it may now or hereafter have to the laying of venue of
any such suit, action or proceeding brought in such a court and any claim that
any such proceeding brought in such a court has been brought in an inconvenient
forum, and (ii) irrevocably submits to the jurisdiction of any such court in
any such suit, action or proceeding. 
Borrower does hereby designate and appoint Corporation Service Company,
as its authorized agent to accept and acknowledge on its behalf service of any
and all process which may be served in any such suit, action or proceeding in
any federal or state court in New York, New York, and agrees that service of
process upon said agent at said address (or at such other office in New York,
New York as may be designated by Borrower from time to time in accordance with
the terms hereof) with a copy to Borrower at its principal executive offices,
and written notice of said service of Borrower mailed or delivered to Borrower
in the manner provided herein shall be deemed in every respect effective
service of process upon Borrower, in any such suit, action or proceeding in the
State of New York.  Borrower (i) shall
give prompt notice to Lender of any change in address of its authorized agent
hereunder, (ii) may at any time and from time to time designate a substitute
authorized agent with an office in New York, New York (which office shall be
designated as the address for service of process), and (iii) shall


 


107

















 


promptly designate such a substitute if its
authorized agent ceases to have an office in New York, New York or is dissolved
without leaving a successor.


 


Section 9.4.            Modification,
Waiver in Writing.  No modification,
amendment, extension, discharge, termination or waiver of any provision of this
Agreement or any other Loan Document, or consent or waiver referred to in any
Loan Document or consent to any departure by Borrower therefrom, shall in any
event be effective unless the same shall be in a writing signed by the party
against whom enforcement is sought, and then such waiver or consent shall be
effective only in the specific instance, and for the purpose, for which
given.  Except as otherwise expressly
provided herein, no notice to or demand on Borrower shall entitle Borrower to
any other or future notice or demand in the same, similar or other
circumstances.


 


Section 9.5.            Delay
Not a Waiver.  Neither any failure
nor any delay on the part of Lender in insisting upon strict performance of any
term, condition, covenant or agreement, or exercising any right, power, remedy
or privilege hereunder, or under any other Loan Document, or any other
instrument given as security therefor, shall operate as or constitute a waiver
thereof, nor shall a single or partial exercise thereof preclude any other
future exercise, or the exercise of any other right, power, remedy or
privilege.  In particular, and not by
way of limitation, by accepting payment after the due date of any amount
payable under this Agreement, the Note or any other Loan Document, Lender shall
not be deemed to have waived any right either to require prompt payment when
due of all other amounts due under this Agreement, the Note or the other Loan
Documents, or to declare a default for failure to effect prompt payment of any
such other amount.


 


Section 9.6.            Notices.  All notices, consents, approvals and
requests required or permitted hereunder or under any other Loan Document shall
be given in writing and shall be effective for all purposes if delivered or
sent by: (a) hand delivery, (b) certified or registered United States mail,
postage prepaid, (c) nationally recognized overnight delivery service, (d) by
facsimile transmission, addressed if to Lender or to Borrower at its applicable
address set forth on Schedule 5 hereto, or at such other address and
Person as shall be designated from time to time by any party hereto, as the
case may be, in a written notice to the other parties hereto in the manner
provided for in this Section 8.6, or (e) other than with respect to an
amendment or modification, an electronic medium.  A notice shall be deemed to have been given: in the case of hand
delivery, at the time of delivery; in the case of registered or certified mail,
when delivered or three Business Days after mailing; in the case of overnight
delivery and facsimile transmission, on the Business Day after the same was
sent; or in the case of electronic medium, when confirmed by e-mail.  A party receiving a notice which does not
comply with the technical requirements for notice under this Section 9.6
may elect to waive any deficiencies and treat the notice as having been
properly given.  Delivery by telecopier
of an executed counterpart of any amendment or waiver of any provision of this
Agreement or the Notes or of any Exhibit hereto to be executed and delivered
hereunder shall be effective as delivery of an original executed counterpart
thereof.


 


Section 9.7.            TRIAL
BY JURY.  BORROWER, TO THE FULLEST
EXTENT THAT IT MAY LAWFULLY DO SO, WAIVES TRIAL BY JURY IN ANY ACTION OR
PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY TORT ACTION, BROUGHT


 


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BY ANY PARTY HERETO WITH RESPECT TO THIS
AGREEMENT, THE NOTE OR THE OTHER LOAN DOCUMENTS.


 


Section 9.8.            Headings.  The Article and Section headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.


 


Section 9.9.            Assignment.


 


(a)           Borrower may not
sell, assign or transfer any interest in the Loan Documents, or any portion of
the foregoing (including, without limitation, Borrower’s rights, title,
interests, remedies, powers and duties hereunder and thereunder) without
Lender’s prior written consent.  Lender
shall have the right to assign or participate this Agreement and/or its
interest in any of the other Loan Documents and the obligations hereunder to
any Person.  In the event of an
assignment by Lender, (a) the assignee shall have, to the extent of such
assignment, the same rights, benefits and obligations as it would have if it
were an original “Lender” hereunder; (b) the assignee shall be deemed for all
purposes to be a “Lender” hereunder; and (c) upon any such substitution of
Lender, a replacement or addition “Lender signature page” shall be executed by
the new Lender and attached to this Agreement and thereupon become a part of
this Agreement.  After the effectiveness
of any assignment, the new Lender shall provide notice to Borrower of the
identity, address and other pertinent information pertaining to the new Lender.
 Notwithstanding anything in this
Agreement to the contrary, after an assignment by Lender, the “Lender” (prior
to such assignment) shall continue to have the benefits of any rights or
indemnifications and shall continue to have the obligations contained herein
which Lender had during the period such party was a “Lender” hereunder.  Borrower agrees that each participant shall
be entitled to the benefits of Section 2.10 with respect to its participation
in this Agreement or any other Loan Document from time to time as if such
participant were a Lender; provided that, in the case of Section 2.10, such
participant shall have complied with the requirements of said Section, and
provided, further, that no participant shall be entitled to receive any greater
amount pursuant to Section 2.10 than the transferor Lender would have been
entitled to receive in respect of the amount of the participation transferred
by such transferor Lender to such participant had no such transfer occurred.


 


(b)           Lender may from time
to time elect to enter into a servicing agreement with a servicer, pursuant to
which the servicer shall be appointed to service and administer the Loan and
the Account Collateral in accordance with the terms hereof and to exercise any
and all other rights of Lender with respect to the Loan as set forth in such
servicing agreement.  Lender shall
promptly notify Borrower if Lender shall elect to appoint or change the
servicer, and all notices and other communications from Borrower to Lender
shall be delivered to the servicer with a copy concurrently delivered to the
Lender, and any notice, direction or other communication from the servicer to
Borrower shall have the same force and effect as a notice, direction or
communication from Lender.  The servicer
shall be entitled to be reimbursed for any cost, expense or liability which is
incurred by the servicer pursuant to such servicing and administrative duties
and which would otherwise be reimbursable to Lender under this Agreement or any
other Loan Document in the same manner and to the same extent as if Lender
incurred such cost, expense or liability in the first place.  The parties hereto acknowledge and


 


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agree that the servicer shall be a third
party beneficiary to this Agreement and the other Loan Documents.


 


Section 9.10.          Severability.  Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.


 


Section 9.11.          Preferences.  Lender shall have no obligation to marshal
any assets in favor of Borrower or any other party or against or in payment of
any or all of the obligations of Borrower pursuant to this Agreement, the Note
or any other Loan Document.  Lender
shall have the continuing and exclusive right to apply or reverse and reapply
any and all payments by Borrower to any portion of the obligations of Borrower
hereunder, provided that such application or reapplication is performed by
Lender in accordance with the terms of this Agreement or any other applicable
Loan Document.  To the extent Borrower
makes a payment or payments to Lender for Borrower’s benefit, which payment or
proceeds or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid to a trustee,
receiver or any other party under any bankruptcy law, state or federal law,
common law or equitable cause, then, to the extent of such payment or proceeds
received, the obligations hereunder or part thereof intended to be satisfied
shall be revived and continue in full force and effect, as if such payment or
proceeds had not been received by Lender.


 


Section 9.12.          Waiver
of Notice.  Borrower shall not be
entitled to any notices of any nature whatsoever from Lender except with
respect to matters for which this Agreement or another Loan Document
specifically and expressly provides for the giving of notice by Lender to
Borrower and except with respect to matters for which Borrower is not, pursuant
to applicable Legal Requirements, permitted to waive the giving of notice.  Borrower hereby expressly waives the right
to receive any notice from Lender with respect to any matter for which this
Agreement or the other Loan Documents does not specifically and expressly
provide for the giving of notice by Lender to Borrower.


 


Section 9.13.          Failure
to Consent.  If Borrower shall seek
the approval by or consent of Lender hereunder or under the Note, or any of the
other Loan Documents, and Lender shall fail or refuse to give such consent or
approval, then Borrower shall not be entitled to any damages for any
withholding or delay of such approval or consent by Lender, it being intended
that Borrower’s sole remedy shall be to bring an action for an injunction or
specific performance.


 


Section 9.14.          Schedules
Incorporated.  The information set
forth on the cover, heading and recitals hereof, and the Schedules attached
hereto, are hereby incorporated herein as a part of this Agreement with the
same effect as if set forth in the body hereof.


 


Section 9.15.          Offsets,
Counterclaims and Defenses.  Any
assignee of any of Lender’s interest in and to this Agreement and the other
Loan Documents shall take the same free and clear of all offsets, counterclaims
or defenses which are unrelated to this Agreement and the other Loan Documents
which Borrower may otherwise have against any assignor or this 


 


110

















 


Agreement and the other Loan Documents.  No such unrelated counterclaim or defense
shall be interposed or asserted by Borrower in any action or proceeding brought
by any such assignee upon this Agreement or upon any other Loan Document.  Any such right to interpose or assert any
such unrelated offset, counterclaim or defense in any such action or proceeding
is hereby expressly waived by Borrower.


 


Section 9.16.          No Joint
Venture or Partnership.  Borrower
and Lender intend that the relationship created hereunder be solely that of
borrower and lender.  Nothing herein is
intended to create a joint venture, partnership, tenancy-in-common, or joint
tenancy relationship between Borrower and Lender nor to grant Lender any
interest in the Collateral other than that of secured party, mortgagee or
lender.


 


Section 9.17.          Waiver
of Marshalling of Assets Defense. 
To the fullest extent Borrower may legally do so, Borrower waives all
rights to a marshalling of the assets of Borrower, and others with interests in
Borrower, and of the Collateral, or to a sale in inverse order of alienation in
the event of foreclosure of the interests hereby created, and agrees not to
assert any right under any laws pertaining to the marshalling of assets, the
sale in inverse order of alienation, homestead exemption, the administration of
estates of decedents, or any other matters whatsoever to defeat, reduce or
affect the right of Lender under the Loan Documents to a sale of any Collateral
for the collection of the Indebtedness without any prior or different resort
for collection, or the right of Lender to the payment of the Indebtedness out
of the Net Proceeds of the Collateral in preference to every other claimant
whatsoever.


 


Section 9.18.          Waiver
of Counterclaim.  To the extent
permitted by applicable law, Borrower hereby waives the right to assert a
counterclaim, other than compulsory counterclaim, in any action or proceeding
brought against it by Lender or its agents.


 


Section 9.19.          Conflict;
Construction of Documents.  In the
event of any conflict between the provisions of this Agreement and the
provisions of any of the other Loan Documents, the provisions of this Agreement
shall prevail.  The parties hereto
acknowledge that they were represented by counsel in connection with the
negotiation and drafting of the Loan Documents and that the Loan Documents
shall not be subject to the principle of construing their meaning against the
party that drafted same.


 


Section 9.20.          Brokers
and Financial Advisors.  Borrower
hereby represents that it has dealt with no financial advisors, brokers,
underwriters, placement agents, agents or finders in connection with the
transactions contemplated by this Agreement. 
Borrower hereby agrees to indemnify and hold Lender harmless from and
against any and all claims, liabilities, costs and expenses of any kind in any
way relating to or arising from a claim by any Person that such Person acted on
behalf of Borrower in connection with the transactions contemplated
herein.  The provisions of this Section
9.20 shall survive the expiration and termination of this Agreement and the
repayment of the Indebtedness.


 


Section 9.21.          Counterparts.  This Agreement may be executed in any number
of counterparts, each of which when so executed and delivered shall be an
original, but all of which shall together constitute one and the same
instrument.


 


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Section 9.22.          Estoppel
Certificates.  Borrower and Lender
hereby agree at any time and from time to time upon not less than fifteen (15)
days prior written notice by Borrower or Lender to execute, acknowledge and deliver
to the party specified in such notice, a statement, in writing, certifying that
this Agreement is unmodified and in full force and effect (or if there have
been modifications, that the same, as modified, is in full force and effect and
stating the modifications hereto), and stating whether or not, to the knowledge
of such certifying party, any Default or Event of Default has occurred and is
then continuing, and, if so, specifying each such Default or Event of Default; provided,
however, that it shall be a condition precedent to Lender’s obligation
to deliver the statement pursuant to this Section 8.22, that Lender
shall have received, together with Borrower’s request for such statement, an
Officer’s Certificate stating that, to the knowledge of Borrower, no Default or
Event of Default exists as of the date of such certificate (or specifying such
Default or Event of Default).


 


Section 9.23.          Payment
of Expenses.  Borrower shall pay all
Transaction Costs, (excluding any Tax Liabilities which are not payable by the
Borrower pursuant to Section 2.10), which shall include, without limitation,
(a) reasonable out-of-pocket costs and expenses of Lender in connection with
(i) the negotiation, preparation, execution and delivery of the Loan Documents
and the documents and instruments referred to therein; (ii) the creation,
perfection or protection of Lender’s Liens in the Collateral (including,
without limitation, fees and expenses for title and lien searches or amended or
replacement Mortgages, UCC financing statements or Collateral Security
Instruments, title insurance premiums and filing and recording fees, third
party due diligence expenses for the Mortgaged Property plus travel expenses,
accounting firm fees, costs of the Appraisals, Environmental Reports (and an
environmental consultant), and the Property Condition Assessments and costs and
fees incurred in connection with arranging, setting up, servicing and
maintaining the Account Collateral); (iii) the administration of the Loan
Documents and the Loan and response to any requests for Lender consent or
approval of any matter; (iv) the negotiation, preparation, execution and
delivery of any amendment, waiver, restructuring or consent relating to any of
the Loan Documents, and (v) the preservation of rights under and enforcement of
the Loan Documents and the documents and instruments referred to therein,
including any communications or discussions relating to any action that
Borrower shall from time to time request Lender to take, as well as any
restructuring or rescheduling of the Indebtedness, (b) the reasonable fees,
expenses and other charges of counsel to Lender or its servicer in connection
with all of the foregoing, and (c) Lender’s reasonable out-of-pocket travel
expenses in connection with site visits to the Mortgaged Property; provided,
that so long as an Event of Default has not occurred and is not continuing, the
Borrower shall not be obligated to pay for Lender’s travel expenses in
connection with more than one site visit to each individual Mortgaged Property
during any twelve consecutive month period and Lender shall use reasonable
efforts to minimize the Transaction Costs paid by Borrower in connection with
such site visits.


 


Section 9.24.          Non-Recourse.  Anything contained herein, in the Note or in
any other Loan Document to the contrary notwithstanding, but subject in all
respect to provisos (A) through (E) below, no recourse shall be had for the
payment of the principal or interest on the Loan or for any other Indebtedness,
obligation or liability hereunder or under any other Loan Document or for any
claim based hereon or thereon or otherwise in respect hereof or thereof against
(i) any Affiliate of Borrower (other than Borrower), (ii) any Person owning,
directly or indirectly, any legal or beneficial interest in Borrower or any
Affiliate of Borrower (other than


 


112

















 


Borrower) or (iii) any partner, member,
principal, officer, controlling person, beneficiary, trustee, advisor,
shareholder, employee, agent, Affiliate or director of any Persons described in
clauses (i) through (ii) above (other than Borrower), and it is understood that
neither the Note nor any other Indebtedness, obligation or liability under or
with respect to this Agreement and any other Loan Document may be enforced
against any Person described in clauses (i) through (iii) above
(other than Borrower); provided, however, that the foregoing
provisions of this paragraph shall not:


 


(A)          prevent
recourse to Borrower, the assets of Borrower, the Mortgaged Property or any
other instrument or document which is pledged by Borrower to Lender pursuant to
the Loan Documents, including all Collateral;


 


(B)           have
any applicability whatsoever to or limit the liability of the parties under the
Guaranty of Non-Recourse Obligations; or


 


(C)           constitute
a waiver, release or discharge of any indebtedness or obligation evidenced by
the Note or secured by the Loan Documents, and the same shall continue until
paid or discharged in full;


 


(D)          prevent
recourse to Borrower and Guarantor, jointly and severally, and their respective
assets for repayment of the Indebtedness, and the Indebtedness shall be fully
recourse not only to Borrower but also to Guarantor, in the event:


 


(1)                                  Borrower
or any Affiliate contests or in any way interferes with, directly or indirectly
(collectively, a “Contest”), any foreclosure action or sale commenced by
Lender or with any other enforcement of Lender’s rights, powers or remedies
under any of the Loan Documents or under any document evidencing, securing or
otherwise relating to any of the Collateral (whether by making any motion,
bringing any counterclaim, claiming any defense, seeking any injunction or
other restraint, commencing any action seeking to consolidate any such
foreclosure or other enforcement with any other action, or otherwise) (except
this clause (1) shall not apply if Borrower or such Affiliate successfully
asserts a Contest and obtains a favorable court order for the Borrower as to
same);


 


(2)                                  any
Mortgaged Property becomes an asset in a voluntary bankruptcy or insolvency
proceeding or any petition for bankruptcy, reorganization or arrangement
pursuant to federal bankruptcy law, or any similar federal or state law, shall
be filed (x) by Borrower or (y) against Borrower with the consent or
acquiescence of Borrower or the Guarantor or their respective Affiliates;


 


(3)                                  of
any Transfer in violation of the terms of the Loan Documents;


 


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(4)                                  Borrower
or the Guarantor makes an assignment for the benefit of creditors or admits, in
writing or in any legal proceeding, its insolvency or inability to pay its
debts as they become due; or


 


(5)                                  of
any breach by Borrower or Guarantor under the Side Agreement; or


 


(E)           prevent
recourse to Borrower and Guarantor, jointly and severally, and their respective
assets, and Borrower and Guarantor shall be fully and personally liable, for
any loss, costs, liability, damage or expense (including, without limitation,
attorneys’ fees and disbursements) suffered or incurred by Lender or any
Indemnified Party related to or arising from any of the following acts
committed by or on behalf of Borrower, Guarantor or any of their respective
Affiliates:


 


(1)                                  any
fraud, misappropriation or misapplication of funds (including Loss Proceeds or
Rents) in contravention of the Loan Documents, or intentional misrepresentation
contained in any Loan Documents or report furnished pursuant to any Loan
Document;


 


(2)                                  additional
financing obtained by Borrower (whether secured or unsecured) in violation of
the terms of the Loan Documents;


 


(3)                                  actual
material physical waste to the Mortgaged Property or material damage to the
Mortgaged Property resulting from gross negligence or willful misconduct;


 


(4)                                  of
any breach of Article VIII hereof;


 


(5)                                  of
any breach of any representation, warranty or covenant in this Agreement or the
Environmental Indemnity Agreement, concerning Environmental Laws and Hazardous
Substances;


 


(6)                                  any
security deposits received by Borrower or Manager from tenants not being
properly applied, returned to tenants when due or delivered to Lender, a
receiver or a purchaser of the Mortgaged Property in the event of a foreclosure
sale upon such Person taking possession of the Mortgaged Property;


 


(7)                                  any
Legal Requirement mandating the forfeiture by Borrower of the Collateral or any
portion thereof because of the conduct or purported conduct of criminal
activity by Borrower or any Affiliate in connection therewith;


 


(8)                                  all
costs and expenses, including reasonable attorneys’ fees and expenses, incurred
in enforcing any obligation or liability or in collecting any amount due under
this Section 9.24(D) or this Section 9.24(E), the Environmental
Indemnity and the Guaranty of


 


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Non-Recourse Obligations, which, as to
Borrower, is a recourse obligation of Borrower as described in this Section
9.24(D) or this Section 9.24(E), the Environmental Indemnity and the
Guaranty of Non-Recourse Obligations, or, as to Guarantor, is a recourse
obligation of Guarantor under the Guaranty of Non-Recourse Obligations or the
Environmental Indemnity;


 


(9)                                  the
failure to pay Impositions assessed against the Mortgaged Property to the
extent there was sufficient funds available to pay and Lender allows Borrower
to apply the same, or the failure to maintain insurance as required under the
Loan Documents, or the failure to pay any deductible amount in respect of any
insurance maintained in respect of the Mortgaged Property, or the failure to
pay and discharge any mechanic’s or materialman’s Liens against the Mortgaged
Property to the extent there was sufficient funds available to pay and
discharge and Lender allows Borrower to apply the same; or


 


(10)                            any
Rents or Proceeds received or collected by Borrower, any Affiliate of Borrower
or Manager and not deposited into the Local Collection Account or the
Collection Account in accordance with Section 2.12.


 


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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized representatives, all as of the day and
year first above written.


 


 


	
   

  	
  LENDER:

  
	
   

  	
   

  
	
   

  	
  CITIGROUP GLOBAL MARKETS REALTY CORP., a New York corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David Vadon

  
	
   

  	
   

  	
  Name:  David Vadon

  
	
   

  	
   

  	
  Title:  Authorized Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
  ARC Communities 17 LLC,

  a Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Scott L. Gesell

  
	
   

  	
   

  	
  Name:  Scott L. Gesell

  
	
   

  	
   

  	
  Title: Vice President